By Speedy O'Short
In the backdrop of Maryland's ongoing financial woes, the state pension has quietly made several impactful moves. There was a substantial sell-off of stock in the past month, without particularly much public information on the reasoning for the sale.
The acquisition of roughly $4 million of stock in Strategy, formerly known as Microstrategy, appears to be a gamble that did not pay off.
Strategy's business model relies upon buying Bitcoin with debt; an entirely unsustainable model now that 401(k)s and individual investor can simply invest in Bitcoin.
The company's stock has dropped 15% in the past month, despite relatively strong returns on the year. It is unlikely, although possible, that the stock value will rise above the purchase valuation without a considerable change to Strategy's business model.
Did the Board of Trustees inadvertently make a $4 million gamble in error? Was the proposal simply based on prior returns, without a detailed analysis of the company's business model?
Most importantly: has the state pension been negatively impacted by significant valuation losses for Tesla and Strategy, two of the ten largest investments of the state pension? What can and should be done to ensure the long-term financial solvency of the pension?
Treasurer Dereck Davis has already appointed leadership to bolster the 529 fund; is his steady hand needed to protect the retirement funds of Maryland's aging population?
While the pension fund is BY NO MEANS at risk of going empty, diminishing returns and short-sighted purchases that necessitate early sales are detrimental to the compound interest and value accumulation of a consistent and steady portfolio.