Search For the Infinite Money Glitch

Photo by Kanchanara on Unsplash

There are so many interesting stories in the financial world right now, but my favorite continues to be MicroStrategy’s quest to unlock the infinite money glitch.

For those who aren’t familiar, MicroStrategy (now just “Strategy”) is a company that raises money from investors and uses it to buy Bitcoin. It currently holds about 4% of all the Bitcoin that will ever be created.

Last summer, I wrote a note called Crypto Bubbles in which I quoted the company’s Chairman, Michael Saylor, when he said

“If you want to 10x your money, you buy bitcoin,” he added. “If you want 100x your money, you buy bitcoin with someone else’s money. If you want to 1000x your money, you buy bitcoin with someone else’s money, and then you leverage the bitcoin.” [emphasis added]

A month after I wrote the note, the company doubled down on its efforts to 1000x its money by unveiling a new type of preferred share called STRC (“Stretch”), with a fluctuating dividend that would always keep the price at par. And even though Bitcoin doesn’t have cash flow to pay dividends, the idea was that it could cover distributions by continuously issuing new rounds of preferred or common stock.

Saylor declared the discovery of this financing mechanism as the iPhone moment for credit markets.

Unfortunately, this specific infinite money glitch hasn’t created infinite money. As pointed out by the Financial Times in its article “Can Strategy pull out of its death spiral?” It’s a Stretch . . . ”

The problem is that keeping Stretch at par has proved far more expensive than expected. Since the listing in July 2025, Strategy has raised the dividend five times, from 9 percent to 11.5 percent. Even that has not been enough. Stretch closed yesterday at $89, implying a current yield of roughly 13 percent. If Saylor wants to drag the security back to par, the dividend will probably have to rise again, perhaps to something closer to 14 percent.

Since the date I wrote Crypto Bubbles, Strategy’s common stock has fallen roughly 75%.

Leverage Creates Fragility

I love this story because it reminds me of three of my favorite Warren Buffett quotes:

• “When you combine ignorance and leverage, you get some pretty interesting results.”

• “There’s only three ways a smart person can go broke: liquor, ladies, and leverage.”

• “If you’re smart, you don’t need leverage; if you’re dumb, you have no business using it.”

Everyone wants to believe there is an easy way to generate excess returns without creating excess value. Everyone wants to believe they have a new approach to using leverage that will be safer than all the versions that came before.

But that has not been true historically, and I don’t suspect it will be true today or any other time in the future. But when the potential prize is infinite money, the temptation to keep searching will never go away.

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Personal Note:

Last Sunday was Father’s Day. We got to celebrate by driving home from a lacrosse tournament and spending the rest of the day with family.

Monday was my 42nd birthday. I worked from home, and my daughter made me breakfast.

A thoroughly enjoyable two-day stretch.