The Bitcoin Retirement Portfolio

It’s always nice to know you’re not the only lunatic.

I woke up today and, as I do every morning, I reached for my phone to scroll the overnight news for a few minutes before heading to the shower and breakfast. And what pops up? This headline:

Global think tank proposed Bitcoin reserve to Amazon

To be clear, I have never proposed that Amazon build its own bitcoin reserve fund. I’m not sure Jeff Bezos would listen to El Jefe’s logic (to his detriment, but neither here nor there).

Still, the proposal is a great idea… so, it’s the subject of today’s dispatch.

This think-tank, the National Center for Public Policy Research, concluded its proposal by advising Amazon to put 5% of balance-sheet assets into bitcoin.

Now, if you’ve been reading Field Notes over the last year or so, you might just recognize that 5% figure. I’ve long been recommending to anyone who will listen that they should put 5% of their investment portfolio into bitcoin.

The logic, if I do say so myself, is irrefutable: The typical investment portfolio spits out about 5% a year in dividend and interest payments. If my assessment of bitcoin as the future of finance is wrong, then at most you will lose one year’s worth of dividend and interest payments.

And if I’m right…

We’ll, let’s do the math.

In this example, we’ll have two $100,000 portfolios: Portfolio 1 that follows the traditional portfolio construction—60% stocks, 40% bonds.

Portfolio 2 (which we will call El Jefe’s Super-Jacked Bitcoin-Flavored Retirement Portfolio) is the exact same portfolio as above, but we’ll pull out 5% and stuff that into bitcoin.

We’re going to hold both portfolios for five years, which puts us at the very end of the decade.

Portfolio 1 grows at an 8.78% average annual rate, which matches the growth rate over the last 30 years of a traditional 60/40 portfolio.

When 2030 rolls around, that $100,000 60/40 portfolio will have grown to $152,315.91.

Now, on to El Jefe’s Super-Jacked Bitcoin-Flavored Retirement Portfolio…

The 95% that’s invested traditionally grows to $144,700.12.

The 5% bitcoin additive, we will assume, clocks a 10x as BTC races from about $100,000 today to $1 million by the end of the decade. That’s a $50,000 addition, meaning El Jefe’s Super-Jacked Bitcoin-Flavored Retirement portfolio stands at $194,700.12 by the time 2030 rolls around.

That’s a 28% retirement portfolio boost from a 5% position in bitcoin. (For both portfolios to end up at the same value by 2030, bitcoin would need to rise to just $152,315. I’m pretty confident we’re going to see that level—and rise well past it.)

And what’s the risk?

Well, there’s $7,615 difference in the value of the 100% stock/bond portfolio, and the 95% stock/bond portfolio. That’s your risk. If bitcoin goes to zero, that’s the money you will have missed out on.

That’s asymmetrical risk/reward, with the asymmetry leaning heavily toward reward.

But there’s another asymmetry at work here to which we have to give honest consideration: My $1 million estimate could be wrong.

And by that, I mean my expectation might be light.

Consider the environment:

• World affairs are iffy at best and the dollar is increasingly losing its fan base globally.
• The Western world, led by the US, is indebted beyond reason and faces a painful reckoning.
• Prez-to-be DJ Trump is pushing for a bitcoin reserve fund, which (if it comes to fruition) will 100% guaranteed prompt other countries into a bitcoin reserve arms race).
• Institutional investors are now pushing heavily into BTC, and others like the National Center for Public Policy Research are calling on the likes of Amazon to build a bitcoin reserve.

Given that environment, bitcoin’s price could very well stretch into the multi-millions. I’ve gone on record with a prediction of just over $1 million, but Cathie Wood, the CEO at ARK Invest asset management firm, has BTC at $3.8 million by 2030. Michael Saylor, who runs software company MicroStrategy (it owns 402,100 BTC on its balance sheet), goes much further with a prediction of bitcoin at $10 million by 2030.

Let’s assume BTC is somewhere between $1 million and $10 million by the end of the decade. That 5% position would have a dramatically more meaningful impact on a retirement portfolio. If Cathie Wood is right, El Jefe’s Super-Jacked Bitcoin-Flavored Retirement portfolio is worth $334,700—a 120% increase over that basic 60/40 portfolio.

If Micheal Saylor is right, then we’re talking about a retirement portfolio worth $644,700 by the end of the decade—4x more than the 60/40 portfolio.

Will any of these numbers be right?

I have no idea. No one does, of course. It’s all speculation.

But I’m willing to risk one year’s worth of dividends and interest payments for the possibility (I’d say likelihood) that bitcoin sees dramatically higher highs by the time a new decade rolls around.

And if Jeff Bezos is smart, he’d listen to what the National Center for Public Policy Research says… and what El Jefe says too.