Why Prudent Investors Are Shifting from Passive Investing to Active Management

Finance U Public Finance U
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Originally published at: https://peakprosperity.com/why-prudent-investors-are-shifting-from-passive-investing-to-active-management/

During this week’s sit-down with Paul Kiker of Kiker Wealth Management, we unpacked a whirlwind of economic and political signals shaping today’s markets. Our conversation traversed Trump’s Federal Reserve drama, China’s bold stance on trade, gold’s unprecedented surge, and the looming risks of a debt-laden economy. It’s a complex, volatile landscape, and we cut through the noise.

Trump’s recent flip-flop on Fed Chair Jerome Powell caught my attention. On April 17, he blasted Powell, calling for his ouster over high interest rates, only to backtrack by April 22, saying he had no plans to fire him. Paul and I speculated on what shifted, perhaps pressure from heavyweights like JP Morgan Chase, who backed Powell. Whatever the underlying drivers, this waffling fuels market uncertainty, contributing to market volatility. France’s unexpected warning that firing Powell would jeopardize the dollar’s credibility stunned us both. When did France decide to begin meddling in U.S. political drama? We took it as another sign that the dollar’s already on shaky ground, especially since France famously triggered the gold standard’s collapse in 1971.

China’s response to U.S. trade threats added another layer. On April 20, their Commerce Ministry demanded equal-footed negotiations, rejecting any deals that scapegoat them. Paul noted Scott Bessent’s claim that tariffs on China were unsustainable, a view leaked from a closed JP Morgan event. By April 22, news of a Trump-Xi meeting sparked a stock market surge, with the Dow jumping over 1,000 points. Yet, Paul sees this as a temporary rally, possibly a “dead cat bounce,” driven by seasonal buybacks and optimism, not fundamentals. With $1 trillion in authorized stock buybacks looming, I railed against them as self-dealing schemes that enrich C-suites. If companies want to “reward shareholders,” there’s a mechanism for that already called “dividends.”

The U.S.’s $100 trillion debt pile – three times GDP – looms large. I showed Paul a chart where debt (the blue line) dwarfs income (red line), an unsustainable gap.

Ludwig von Mises warned that such credit expansion ends in currency collapse unless curbed voluntarily. Trump’s plan to slash $1 trillion from a $6 trillion budget seems impossible when 80% is untouchable (interest, Social Security, Medicare, defense). Paul suggested selling assets, but I countered that’s a fleeting fix, like burning through a trust fund.

Energy constraints compound the issue. Despite Trump’s “drill baby drill” mantra, U.S. oil production hasn’t budged in two years.

I explained to Paul that breakeven prices for new wells are $70-$90, far above the current $60 range. Without higher prices or massive subsidies, production will stall, choking economic growth. Political fractures, like Jamie Raskin’s threats against nations aligning with Trump, deepen the chaos. I was appalled by Raskin’s vindictive tone, which Paul likened to a football player sabotaging his own team. This divisiveness risks gridlock or worse, undermining any chance of unified action.

Gold’s meteoric rise since Q1 2024, mostly untouched by retail investors, signals big players, likely sovereigns, are hedging against systemic risks.

Strangely, when gold dropped $117 on April 23, silver rose 2%, a rare divergence Paul and I found intriguing. It suggests gold’s pullback is temporary.

In closing, Paul urged portfolio caution, advising investors to stress-test portfolios for a potential 50-60% market drop, beef up emergency funds, and secure income streams. At PeakFinancialInvesting.com, we offer free consultations to help you build a plan tailored to your specific circumstances, because in this Jenga-like economy, one wrong move could topple everything.

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As always, an ideal summary.

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Agree
Another thoughtful dialog

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Gold Be Like…

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To your point. My daughter and son-in-law both work on Wall Street. Though gold and silver is never discussed or recommended, I have been able to convince them to put some of their money into PMs. When Liberation day hit gold, I told them to buy more, which they did. What was surprising was how shocked they were at the price.

They work on Wall St. They advise people on how to grow and protect their money. (They get paid very well for this service). They even own a decent amount of gold and silver yet, they had no idea that the price had risen so much.

I was dumbfounded, but I guess they know more than most of the other people they are working with. Beware whose advice you take. Experts just might not be expert on the subject.

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Luke Groman often talks about his speeches at big investor conferences where the audience is full of pension fund managers and the like. He often speaks positively of gold and afterwards somebody comes up to him and says "I agree with everything you think but if I buy gold and it goes down 20% I lose my job. If I buy US treasuries and they fall 20% I and everybody else gets to keep their job.

The amount of group think in the world of finance is quite incredible considering that money is on the line. But that just illustrates how strong the need is to fit in for most people. As in other areas there are real social consequences to not being part of the bait ball.

I think this may be why so many of the maverick finance people also got COVID right “medium to early on”

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I can quickly describe what I have seen regarding gold in my 70 years, being brought up by grandparents born in 1898.

During the wars we had no money so it was only seen in wedding rings, and Royal jewelery.

In the 50’s -60’s it was seen as only the stuff of governments and smugglers. Not really understood by ordinary folk, and only valued in the form of some sort of trinket, but always valued over silver. This was supported by films like Goldfinger.

In the nasty 70’s when France began pushing for a more equal division of gold global power, the metal became seen as the driver and supporter of currencies, ironically just as its power as such declined, and possession of oil sources became paramount.

In the 80’s it was seen as a daft option for the investor, and although more easily obtainable, the culture was neatly controlled to keep only a few families in the know.

By the turn of the century, buying gold was more easily done with postal and web links to the Birmingham and London (retail) dealers.

Chris Martenson appears to have realised its potential as ‘wealth’ rather than a gamble, or a smuggler’s treat around the 2000’s ?

Lately, those who look at the right websites or follow the correct Guru, have bought gold in one form or another, and gold has come ‘back into being’ as a valid commodity.

My view is from a working class family in the North East of the UK, but my family in Australia would see it in a different way, with those who were able to stand the heat and snakes, and also take a massive risk, being able to occasionally make a fortune. Those who lived in Beruit also had a totally different view over this timescale, but that got stood on ‘big time’.

Many will continually miss the point, as always, but the 2 things I would point out to remember are:

  1. The buying back of gold in the 30’s

  2. The way gold could be bought in the UK for a certain price but smuggled to Singapore and sold for several times as much, in the 50’s and 60’s.

“The ‘Good Old Days’ could easily return”

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I’ve been tracking my net worth monthly for several years. It’s not that high, but it has been growing (though very slowly).
Earlier this week, I decided to add a line to my spreadsheet to track it in terms of ounces of gold. When I do that, I see it hasn’t changed much at all, and in fact has been slowly dropping for the past several months. Disheartening, to say the least. Time to rethink my strategy.

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So your statement begs the question: do you have PMs in your portfolio? BTC?

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Chris & Paul,

While I have great respect for both of you and thoroughly enjoy your analysis, I believe you make a fatal mistake in your assumptions around the 16 minute mark with, “There’s no easy way out of it.” Based upon, “But when you look at it, like 80 % of that six is now interest payments, social security, Medicare and defense … almost impossible to touch any one of those.”

Defense can be cut dramatically. If we withdraw from NATO, stopped being the worlds police and close all foreign bases bringing all troops home (which would also end the Ukraine conflict), and close the CIA “scattering it to the 4 winds” defense could be cut to one tenth its size easily.

Further the “sale of assets” is not a wild idea. Transfer all federally owned property outside of DC to the States.

Actually shut down US-AID (rather than shove it in to State), continue the full shut downs of BLM, ATF, DoE, EPA, etc. (FULL SHUT DOWNS - lay off all personnel, destroy all records, sell all buildings or level them to the ground.)

Also, close the unnecessary and particularly the corrupt federal circuits. (This is likely left undone so it can be used for campaigning at the midterms.)

Medicare is riddled with fraud. RFK was asked this week by Chris Westfall (@ 2:54) why no action has been taken by the HHS Office of Inspector General on the recommendations. Sadly RFK Jrs’ ‘handlers’ halted the dialog and rushed RFK Jr off – hoepfully RFK Jr gets after this.

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Is The Market Sniper A Scammer??
Apologies for the clickbait title but given the topic of active management I’m considering becoming a paid member of The Market Snipers trading program.
Normally I’d avoid this type of proposition as a likely scam however in this case I think it may be worth the 3k gamble.

Is anyone on here involved with the program or have any opinions on joining such a group?

Also does anyone have any opinions on Monetary Metals (https://www.monetary-metals.com/) ? It seems too good to be true however the founder is extremely knowledgeable and strikes me as genuine.

Any and all opinions welcome!

Many thanks

GMoney!