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Murphy’s Law — Your MDDC Update from Executive Director Jack Murphy

Finance committee decided on reserve investments
By Jack Murphy

The MDDC board’s finance committee decided at its July 17 meeting to preserve the liquid cash reserves of the association as it heads toward a leadership transition by the end of the year.
The committee met at the office of President Paul Milton at the Baltimore Sun with Clarence Murray of Wells Fargo Advisors, who has handled the MDDC investments since they were created in 1996. The finance committee is composed of the members of the executive committee. Attending the meeting were Treasurer Ben Phillips of the Afro and Secretary Geordie Wilson of the Frederick News Post. Past President Pat Richardson, publisher of Landmark’s Annapolis Capital and Carroll County Times, participated by telephone. Vice President Suzanne Fischer-Huettner was not able to attend.

The committee also declared a $45,000 dividend from the MDDC Press Service to the MDDC Press Association to pay for operations in the second half of the year. The Press Service is the wholly owned, for-profit subsidiary of the association, and its annual dividends provide funds for the association.

The Association’s account balance as of July 13 was $349,614. That includes $33,851 in common stocks; $189,368 in bonds; $16,751 in a SPDR Standard & Poor's 500 index Trust and $109,525 in a money market account.

Last year, the committee decided to accumulate cash because of the uncertainty surrounding the “financial cliff” and the presidential election, rather than place funds in longer-term investments. So, the association has a larger than usual amount of cash, but the money market is only paying 0.01 percent interest. The committee voted to keep $50,000 in cash and the remainder into a 6-month certificate of deposit, paying 0.35 percent.

This will give the board access to the full $110,000 in cash in January. By that time, I will be retired as executive director, and the board will have selected new leadership. The cash will provide a cushion to meet any contingencies, and the committee can meet again to reinvest.

In addition, the committee voted to take the funds from two bonds that are maturing this month and next, totaling $50,000, and add that to the SPDR fund to try to increase returns. The SPDR tracks the S&P, and has been out-performing an interest rate.

The committee also approved rebalancing the common stock portfolio, which is based on the Dow 5 strategy. The five Dow stocks with the lowest price and the highest yield are determined each July, and the association sells stocks that have risen in value and buys stocks that are lower. This year, it will sell J.P. Morgan and buy Intel.
The investment portfolio was started with $200,000 in 1996, and the association added $50,000 in 1998 and $35,000 in 2003. The plan was to protect the association during difficult economic times, and that was exactly what happened.

MDDC took two distributions from the portfolio to pay for operating expenses when the Press Service suffered losses, $55,000 in 2009 and $65,000 in 2010. After significant downsizing and cost-cutting, the association returned to profitability last year, and the board was able to add $25,000 to the account.

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