The Wolf Den #489 - Do This And Become A Millionaire

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There’s a simple trick to becoming a millionaire if you are willing to be patient. It’s not sexy, but it works.

If you’re already a millionaire and want to hit the 8-figure mark, the same rule applies.

It’s called saving.

Exciting, right?

Let’s start with the saver who is yet to make a million dollars.

Let’s imagine someone in their 20s who has the unfortunate habit of buying Starbucks coffee daily and going out to lunch 2 times a week. At $3.65 a cup every day and a $10 lunch twice a week, the math looks like this:

$3.65 x 365 = $1,332

$10 x (52x2) = $1,040

Yes, that’s a cheap lunch.

Not accounting for any other bad spending habits, this person could have saved $2,370 last year by simply drinking free coffee at work and skipping lunch out (yes, I am aware that food at home is not free, this is just an illustration).

Before I show you the magic, I will give this person the benefit of the doubt and round down to $2,000. Let’s look at what $2,000 invested over a 40-year period can look like.

If you invest $2,000 into the market once and can manage a 7% return with compound interest for 40 years, you are looking at $30,000 by the age of 60. This is without ever contributing further.

Now let’s change one small detail. Imagine you decide to cut out Starbucks and extra lunches entirely and you contribute $2,000 more to your investment account each year. Instead of having $30,000 by the age of 60, you’re at $427,662. You are basically halfway to $1M by changing up a few habits and being smart with your money.

- annoying coffee drinking millionaire.

This person is correct. When you hit a certain point of wealth, the small purchases don’t matter as much, but the principle is the same. Let’s say our second person has done well and became a millionaire at the age of 30. Instead of making payments on a luxury car, boat, and apartment, this person decides to put away $500,000 up front and contribute just $1,000 a month to their retirement. Compounded at 7% interest over 30 years to the same age of 60, this person will have just shy of $5M. $4,939,656.96 to be exact.

Add on an extra 10 years and they hit the 8 figure mark. Compounding interest is magic - the last 10 years out of 40 will double the stack.

Saving isn’t sexy, but it works.

I do want to point out that the whole reason behind investing and saving is to have a better quality of life. I would never advocate for someone to save every penny until death. That negates the purpose of saving in the first place. Money is meant to be both spent and saved. It’s all about balancing the two to be both rich in wealth and happiness.

Side note: people often ask “where can I get 7% consistently on my money?”

The S&P 500 index has returned a historic annualized average return of around 10.5% since its 1957 inception through 2021.

When you zoom out far enough, the stock market always goes up, and brief periods of poor performance are the exception and not the norm.

You can do even better in crypto.

In this report, we bring to you the latest in on-chain cryptocurrency analysis. We look at the blockchain directly and analyze balances, transactions, and the overall activity of market participants. This gives us a unique insight into the future of the market.

This section is written in conjunction with IntoTheBlock (ITB).  ITB is an intelligence company that leverages machine learning and advanced statistics to extract intelligent signals tailored to crypto-assets. IntoTheBlock tackles one of the hardest problems in crypto: to provide investors with a view of a crypto asset that goes beyond price and volume data. 

The Wolf Den research team uses IntoTheBlock to dig deeper and get the most important insights about the crypto market.

We have discussed before how long term investors have remained unfazed by the recent price movements in Bitcoin, and have continued to accumulate. The majority of BTC holders (58% of addresses have been holding over a year) view Bitcoin as a store of value and believe that it will appreciate in time.

But recently we have spotted an interesting fact, and is that retail investors are buying Bitcoin again. The number of addresses with a given amount of holdings can be representative of an asset’s broader adoption. Particularly, amounts such as 0.1 BTC or 1 ETH are high enough to show holders are serious about their investments but are low enough to be attainable.

Here we observe the growth in the balance of addresses holding less than 1 BTC. Although there are no clear short-term patterns aligning with BTC’s price, this long-term uptrend is a positive indication of increasing adoption.

Finally, here is a chart for those interested in seeing a full snapshot of the current state of the Bitcoin holdings distribution.

WEEKLY CHART

Bitcoin continues to be a chop fest, offering little direction or inspiration. This is a rudderless ship, although nothing has changed on the chart in the past few days to invalidate the bullish divergences discussed.

For now, they key weekly levels remain the same and are worth watching on the close on Sunday.

Price was rejected at the center line of the Bollinger Bands, struggling to break into the top half once again. As you can see, the bands are tightening dramatically, which is almost always a precursor to increased volatility and a major move. This will likely take a few days to play out, but worth watching as the bands are rarely this tight.

The hits just keep on coming, as earnings continue to be weak and tech stocks continue to dump like illiquid shit coins.

Everyone’s favorite stock darling (mine included) just reported their first loss since 2015. I am, of course, talking about Amazon.

Online sales at the e-commerce giant slipped 3% in the first three months of the year, as the boom to its business from the pandemic starts to fade, the firm said on Thursday.

Overall, the company reported a loss of $3.8B, much of which was driven by a hit from its investment in electric carmaker Rivian.

Expenses are also rising rapidly. Inflation added $2B in expense in the quarter, while costs more within the firm’s control also hurt, executives said.

The company has increased wages to attract staff in the face of labour shortages and is also facing a widening unionising drive in the US.

Meanwhile, higher fuel prices have made delivery costs more expensive for the online retailer.

Apple also reported earnings, which were more impressive then the other “A” company just discussed. But it’s not all roses.

Apple warned its sales could be hit by up to $8B following disruptions from lockdowns in China. Covid-related shutdowns in China and chip shortages are limiting the firm’s ability to meet demand for its products. Tim Cook states that he was unconcerned about consumer demand, but more worried about the supply issues and the ability to get them products.

Amazon stock is currently down around 8% pre market, with Apple down around 4%.

I am still holding both companies with little concern long term. But this is not currently a healthy market.

This is an interesting exercise that I came up with for traders that I have taken to attempting on my own. My personal goal is a 65% hit rate over a month, which I find to be excellent.

In sports betting, you can beat the spread 60% of the time and be a legend. Most barely crack 51%. That’s binary - right or wrong. Trading is exponentially harder, so starting with “up or down” is a good exercise to show just how hard it is, before considering risk management.

Can you be right 50% of the time? If so, the next exercise is deciding where you would theoretically place your stop loss and take profit orders. When you consider risk management, you not only have to be right about direction but have to avoid being stopped out before it goes your way and also have to be willing to exit in profit before a directional change against you.

The exercise is difficult, and will display just how important risk management really is - it’s everything!

I host a round table every Thursday with the brightest minds in the crypto space. Every once in a while we have a truly important conversation that is worth listening to over and over again.

I had the honor of sharing an hour with Cailtin Long, Alex Mashinsky, Bill Barhydt and Mike Alfred, and we had a healthy and respectful debate about the role of regulators, banks and crypto platforms moving forward. This is really a must listen conversation.

Crypto investors have long been unable to utilize their coins to secure mortgages and loans. Banks don’t consider crypto to be part of your net worth, meaning you can forget securing a loan based on the coins in your portfolio.

This is changing.

Popular wealth management platform Abra has teamed up with a blockchain real estate company called Propy, making crypto-backed mortgages a reality. Propy was in the news recently for conducting the first real estate NFT auction. 

Bitcoin is pristine collateral, so it is only a matter of time before crypto backed loans become par for the course.

Here is another recently announced example.

Panama is becoming a crypto friendly haven. Lawmakers have passed a broad bill that eliminates capital gains tax on crypto, allows taxes to be paid in crypto, and opens the door to public and private use of cryptocurrencies. The bill now heads to President Laurentino Cortizo for the final signature before it comes into law. That makes 2 countries in just one week turning crypto-friendly. Slowly then all at once.

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