The U.S. Federal Reserve is "trapped", says Michael Gentile, strategic investor. Gentile told David Lin, anchor for Kitco News, that two scenarios could play out: either the Fed raises rates by 25 basis points next year to regain confidence in the markets, or they let inflation run hot and do nothing. Neither of these scenarios will be enough to contain inflation. In order to really "go to war" against inflation, the Fed will need to raise rates to at least 3%, which would cause stocks to crash by the order of 50%. Even a 25 basis point raise would trigger a 10-20% correction, Gentile said.
Interest rates inflation the dollar stock markets. These are all major factors, headwinds, tailwinds for gold that we should be focusing on right now with gold investors. But where are these variables headed? We're here to talk about these forces with Michael Gentilly. He is a strategic investor, formal institutional money manager, and he is here to break down where he thinks the markets are going.
Michael, welcome back. He'd be great to be with you again, you have some good news for gold investors. Spoiler alert, bad news for stock investors. We'll be going over everything here. Um, we talked offline and you, you made a very pointed point. The like, I like to bring up first. You said that one of the reasons for goals dissent over the last year is the expectation for higher interest rates.
Paradoxically. That should be also the reason for lower equities yet equities are not responding the way you think they should be. Can you elaborate more on. Absolutely. I think, I think equity investors, aside from those books and the gold market are operating a bit of a vacuum, right? So we've seen a big sell off in gold.
As investors have gotten worried that the fed is going to intervene either taper or raise interest rates quicker than the market thought. But if you fall through that thought process logically, so you hammer gold a hundred dollars because you feel interest rates have a chance of going higher. Sooner.
The stock market's currently trading at a record high valuation like nosebleed valuation, stock market bonds, real estate, any pretty much asset class you look at is at record highs. And that's all being underpinned by record, low interest rates. The discount rate of zero in any financial model will allow it infinity in terms of valuations.
So the same investors that are selling gold are hammering gold because they fear that rates are going higher, should actually be unloading all their equities, their bonds, and their real estate. If they believe that's what's actually going to happen and they're not doing that. So there's a really consistency.
So for me, it's an invest that provides a major opportunity. There. Gold is going much higher from here or stocks, bonds, and real estate are going much lower. Uh, so I'd rather be on long gold and gold equities than bladder because those have not felt any pain yet from this perceived fear that market is seeing in the gold market.
And before we move on any further on the macro side, let's take a look at this chart. This shows the, a gold versus S and P 500. So you've got the GLD over the spy as a ratio. What does this chart. Yeah. So I'm a contrarian investor by heart. I think you make multiples of your money or significant outsize returns on your money when you go against the herd.
Right? So this chart tells you 16 years. Gold has never been this cheap versus the S and P 500, the last 16 years. And obviously since 2008, the market's pretty much gone, nothing but ups and stuff, financial crisis. So that ratio has gotten wider and wider and wider over time. So one unit of gold will buy you the smallest amount of stock has ever bought in the last 16 years.
So that ratio typically mean reverts on the market. Correct. So if I'm right about my thesis, that if rates go up, the market's going way down, well, that ratio is going to revert either by the market falling dramatically in gold, holding its value or. Appreciating significantly while the market goes flat.
That's that's the chart saying there is a big valuation gap or big spread between gold and the market that you haven't seen. The last 16. Let's talk about rates going up. You were on the show a few months ago and a very popular interview. I could make people to watch that right now. And I'll link that in the description below, but one of your main points of your thesis would that interest rates cannot go up to historical, uh, uh, average levels that say five, 5.7%, which is what we were before.
Let's just take 5%. For example, you told me that at $30, $30 trillion of debt, national debt, a 5% interest. Would imply a $1.5 trillion interest expense, uh, payment every year, which would bankrupt the treasury. So, but now you're saying that interest rates should go up. So what walk us through how you can now, you know, resolve these two, uh, paradoxes here.
Yeah. I'm not saying they should go up and saying investors that are selling gold. Think that this is rates are going to go up or should go up. But I'm saying I'm instilled in firmly in that camp. I haven't changed my view at all day that just rates cannot go up materially, knock it up. Yeah. Yeah, I think the market is adopting the same playbook for the last 40 years, which is, you know, the economy improves, you know, fed raises rates.
But if you look at the last three or four downturns, you know, oh 1 0 8, you know, every, every time, even 18, every time there's a downturn, the fed tries to raise rates and they're able to raise rates, ever lower amounts about the market imploding. And so if you look at a 40 year charter rates, you see this down 40 year downturn because they're, they're piling on so much.
That they're their incremental rate increases are ever more painful. Like you just start with that point. They're at $30 trillion of debt at 5%. It's 1.5 trillion. The U S government took in 3.5 trillion of revenue the previous year in 2019, the best year ever before the pandemic. So that would simply bankrupt the us treasury and the us government.
Right. So they're really pinned in a corner. They cannot raise rates. The market thinks economy gets better rates go up. I sell. They're not factoring that in 2008, we had around $10 trillion of debt, and then we have 30, $30 trillion of debt, $20 trillion, more debt. So the capacity for this, and it could barely raise rates after 2000.
So what can they do now? They can't do very much, they can pay lip service, they can talk a tough game about transitory inflation. They can talk about how it's all going to go back to normal. The reality is the fed wants higher inflation because the only way to get rid of that debt is to print ever more money, have inflation run higher than interest rates.
And you pay back that debt with ever worthless, more worthless dollars in the future. They can't say that publicly because that would make the U S a banana Republic. But that's really what they're what they're trying to do. And while still trying to maintain some sense of credibility. And that's the, that's the catch 22 they're in right now.
Okay. Well, w w well, let's talk about how the U S can turn to Cuba or Venezuela, but I wanna, I wanna, I want to talk, I want to focus more on, um, uh, this debt now I've got two charts that you've prepared for us. So the first one shows debt maturities, total outstanding, marketable debt, average maturity, uh, in Q2 2021, uh, we're at 69%.
We're starting on the nine months, 69 months, sorry, six to nine months. So what does that tell you again, if you're in the camp that you think rates are going higher is another slide illustrating how trapped the fed is, right? It's like, it's like you have a house, it's got a five-year maturity till the mortgage comes due and you can't afford a 2% rate increase when they're on your loan.
Right? So the fed has six, six years, the entire maturity of the U S federal $30 trillion debt will need to be rolled over. That's basically what it's saying. So if you have to refinance $30 trillion of debt in the next six years, If rates move higher, that pain is going to be felt immediately. If you got a 30 year maturity on your debt, average maturity, right, then you could kick that count down the road for a long, long time.
But we're sitting at a five, six year window here where that most, that that's going to roll over. And if you're rolling over debt, that's paying one or 2% today at four or 5% in the future, you're going to feel immediate pain. The next four to five years, the us government terms that their ability to finance.
Yeah. And in terms of, um, the breakdown of the debt that they own, I'm curious as to how much of that debt would actually be impacted by a raise in the, uh, in the, in, in the interest rates were short-term rates, rather, because if let's say they have, if all their debt was long-term maturities and they're locked in the non-variable, then that wouldn't really be an issue.
Right. But that's what this next chart show feds ownership of treasuries. Can you break that down? Well, it just shows you the extent of intervention, uh, by the federal reserve, the bond market, the bond yields in the U S should not be 1.3 at 1.4% of the tenure today. The only reason why they're are 1.3, 1.4% is because the federal reserve has bought 25% of all the bonds in circulation.
So that's, you know, round numbers, seven and a half to $8 trillion of debt that the federal reserve owns. That means they are the buyer, none of last resort. They're the buyer first resort. They're buying almost all the debt, the new issuances that are coming out in the market today because. Rational investor would buy a bond for 10 year yield at 1.3%.
When inflation came out this week at five and a half percent, you're, you're basically a negative 4% real return on that. You're locking a sign yourself up for 10 years of negative returns, real returns, right? So it shows you that, that the fed is having to intervene evermore in the market. That chart shows you since 2008, they're buying ever larger percentages of the bonds that are being issued to finance the U S government.
And I see that trend continuing because I don't see many people wanting to buy bonds below the inflation rate. That's a, that's a surefire way to lose a lot of money. And so the only one want to do that is the federal reserve, because they don't really have to answer to shareholders or investors for their returns over time.
How much roughly of the. Treasury is that the government hold is, uh, is short term maturity, uh, debt versus a long-term fixed, uh, fixed, fixed interest rate. I think right now it's probably proportional. I don't have the access to all the federal balance sheet of their bond book, but I would say that they're probably buying proportional amounts of long-term and short-term debt.
If I was the federal reserve of the U S government, I'd be trying to issue 50, 30 year bonds as much as I could right now. I don't think they can do that because even doing that will signal to investors that they're quite concerned about their ability to hold rates down in the longterm. So they're just trying to keep the sense that everything is fine.
Nothing to worry about here. Inflation is transitory. We can finance our debts. There's no problem. Uh, but eventually the, the, the, the, the roaster Druze is going to start growing and they're gonna be in trouble at some point. And the markets can become very, obviously they cannot finance their obligations at some point.
Yeah. So your, your thesis then is that the federal reserve cannot raise rates, or do you think that, or let me just, let me just clarify here either you think that they will not ever raise rates or you think that eventually they will have to, and is going to be catastrophic impacts on the market? Yeah. So scenario one would be, they, they try to show their stuff.
And if inflation keeps running at five, six, 7%, like we're seeing now taking place is actually higher than that. But the published numbers at five, six, 7%, they come out and show, okay, we're going to do a 25 basis point increase. And I think in the past the 25 basis point increase would not have caused massive panic in the market.
Given the amount of leverage we have in the federal system, mental leverage we have in the market, the amount of speculation we have in the. I think a 25 basis point increase will cause massive amount of pain in the market. You might see a 10, 20, 30% sell off on a 25 basis point increase, which is doing nothing in the big picture, but it shows you how leveraged the system is and how it little, it can afford a rate increase in that scenario, the federal probably panic and pull back either cut rates or we intervene.
The buying bonds are trying to stabilize the markets once the gold investors and the market sees that they'll realize the fed is truly trapped. So that's option one, option two is that they just let inflation run really, really. Keep talking about it, being transitory and invest. Eventually investors realize that they can't raise rates and they're not acting when they should be acting.
And that's the same signal, right? Either you can't raise rates or you're not raising rates when you. That sends the same signal to the market. That will be very negative for equities. I think in general, I'm very positive for gold because mark people realize that real rates are negative. Rates are here to stay, that the dollar value is going to decrease dramatically.
Paper money is going to be ever imprinted in perpetuity. And that'll be the signal that really need to kick off the gold market in a, in a very meaningful way. Which of those scenarios that you've just mentioned scenario, it's never a one on one. Raise interest rates by 25 basis points with scenario two in which they don't raise rates and just let inflation run hot.
Which of those is worse for the equities markets? I would imagine that keeping rates the same would be good, right? For stocks. Yeah. I think, I think that the rate, the rate increase is likely where they're going to go there unless they want to lose all credibility. They're going to have to do some kind of nominal, like 25 basis point rate increase.
At some point, if we keep printing numbers like this, I think that's going to be, that's going to be the though the reaction to the market to that rate increase is going to tell you how the. So I think that's actually the catalyst for gold to rip higher will be when the market sees the reaction of a 25 basis point increase in how vicious it is on the stock market counter to that.
What you're afraid of is actually what you want to see as a gold investor, because that'll prove my point that the fed can not intervene to the extent that investors are fearing like a 1% or 2% increase in interest rates over time. Okay. So let's stick with that. A scenario then the markets are anticipating such an increase in real industry.
By 20, 23. Do you agree with this timeline? If you want to run a serious economy and a real responsible federal bank and a government, I'd be raising rates sooner. I'd be cutting back on spending and balancing the budget. No one's going to do that. There's no political appetite for that. There's no responsibility for that.
So I would think that they probably will, would want to raise rates sooner, but they're messaging 2023 because 20, 23 so far. But there's so much stuff that can happen between now. And then it's almost like an empty promise, right? It's the kind of thing the check is in the mail. You know, you money David, but the checks in the mail it's come and don't worry.
Right? So I think that 20, 23 dot plot, just a big, big joke. I mean, if place is running five, six, 7%, your unemployment rates, five and a half percent, you should be raising rates now, but they're not. And the fact that they're not raising rates again comes back to my point, they're trapped and they can't tell you that they cannot raise rates.
So they just want to dangle that interest rate. 2023 to make you look like they're taking it seriously. And they're going to be responsible stewards of the us dollar, but in reality, they're extremely stuck. Uh, and they have their hands tied, their hands tied behind their back. Okay. So then let me ask you this, what needs to happen?
In order for the fed to say, look, I know we're stuck, but we have no choice. Let's raise it by 25 basis points. Do we need even higher inflation? Do we need to market sell off first without that? Actually wouldn't even make sense, but, uh, do we need a, do we need a, do we need the economy to really overheat?
Uh, do we need unemployment to come back down to pre cover levels? What do you need to be looking at? What, what, we're sorry, what should you be looking at as an investor? Yeah. You think you need proof beyond doubt that their inflation is, is a transitory narrative as false. So I think if you keep on stacking up 5, 6, 7, 8% inflationary numbers, if there's no pause and inflation, I think they're going to either have to make a move or implicitly imply that they're trapped one or the other.
They're going to have to do something. So I think unless they want to lose all credibility, they'll have to make a move. If you have inflation running six next six months by six, 7%, they're going to have to do something cause that to it, arguable no longer be. Okay, well, I'm asking you for the timeline, because you said that gold will take off.
Once they signal that they can't do anything anymore, 25 basis point raise, they have to address this issue. So once again, when do you anticipate that this could have. I think they, because I said they should do it in the next six months. They probably won't. Right. But I would say if you, if you're, if we're talking the same time and you know, January, February, March, next year, and we're still seeing really hot inflation numbers and they haven't moved, I think gold will have repped much higher if they have moved.
I think the market will react really negatively. And that'll, that'll assure gold investors that they're not going to be overwhelmed by interest rate hikes. Right. So either or uncomfortable, but I'd say probably they should move between late this year, early next year. But I seriously. I'm going to pull up the gold versus S and P 500 charges.
One more time. And just based on your analysis, should gold run higher? How high can we. There's a few things. I mean, one goal itself. If you look at gold versus real interest rates, so real interest rates are firmly in the negative camp right now. I think you may have shown that charter in previous guests in the past David, but that, that chart there would imply that gold should be 1900 to 1950.
Maybe, maybe more currently based on that. So there's been a big, a big, yeah. Between the two, I think gold should at least be approaching the old all-time highs. And the question you haven't asked, which is the obvious follow-up question is, well, why hasn't it moved higher? Right. Why, why, why is this gap persisting?
I think why don't we talked about the fear of interest rate hikes, which is overblown we've forgot, but we've talked through that in detail too. Is. Market's at all time highs, right? Every asset class you own is on fire. I mean, cryptocurrencies, speculative, tech stocks, uh, real estate, uh, high yield bonds.
Everything is ripping and people are making lots of money by taking a lot of risks and thinking their market wizards by making tons of money in a very speculative market. So in that kind of. Gold is kind of like your fire insurance. Gold is the safety valve in your portfolio who wants to own gold. When you can make a hundred percent of the day buying gain stopper, AMC cinemas as a mean stock, right?
I mean, companies that are qualified bankrupt that are going up 200% in a day. So that kind of speculative money is all flowing into the market. Gold doesn't look that exciting. Gold really works. When the market starts to show some cracks, people start to get nervous. It's a fight to safety. When everyone's partying, taking wild risks, there's no interest in safety.
So the real rate, the real rates will we'll we'll catch up. It'll be very violent when it does, but when the market's and party on mode, it's very hard to attract investors to go. So that's reason. Number two, that goal, I think, is this lagging, the rate fears, but also the, the speculative party on nature of the market right now is not gonna attract a lot of friends who are golden.
Sure. Gold versus real rates. You're right. There is a divergence. And you mentioned that gold will catch up and that's, uh, you know, the divergence will close, but why can't real interest rates rise? Why can't gold stay low as it is. And real interest rates just rise. Once again, for the audience, there was a negative relationship between real rates and gold.
And right now we're seeing a divergence. This is chart. Yeah. So, so coming back to our discussion about that. So there's too much debt. The more negative, real interest rates are the lower, the burden is on the U S government to pay back their debt, right? Because inflation runs hotter, your pay as real interest rates rise that puts ever increasing pressure on the federal government to find installed obligations, right?
It's the same argument. So a negative 4% actually means they're getting a free 4% carry per year on their debt to fund their infrastructure projects and their pet projects. They can't afford with the revenues they have today. So when real interest rates rise, that puts pressure. Asset valuations that puts pressure on their federal bounce sheets, but especially on the real estate market on the bond market.
So again, it's the same, same argument. We need negative, real interest rates. I think in perpetuity to maintain the fiscal order of the governments, the mess domestic governments have made with their boundaries for the last 35 years, so that no one, no matter how you strike it, they have to suppress those rates, the nominal rates and the real rates need to stay low.
Otherwise it have some serious, serious triples and serious, serious repercussions in the economy. Okay, so, uh, you brought up inflation. Let's talk very briefly about inflation. We had a headline CPI come in earlier this week at 5.4%. That's the same number as June. So now wall street analysts were speculating that inflation has peaked for the time being.
Do you agree with that analysis? I don't, because I think that the governments want inflation to be hotter than they're telling you. And two, I'll give you some anecdotal evidence. I'm going touch a lot of business owners in my line of work. Is it private businesses and investors? None of you are where you're working from, but you know, we're seeing for ha for higher health signs that where everyone's looking for labor, right?
I have buddies that are trying to that own businesses that are used to pay their workers 15, $16 an hour in factories or bakeries, that kind of things they're offering 22, 23, 20 $4 an hour. And they can't find anyone who wants to work. Right. And so you and I both know that once you raise someone's salary, $24.
You know, I can't, you can't go back and say, well, you know, that inflation stuff that was transitory. So we're going to cut your salary back to $16 and we'll see you on Monday. Right? So, so once the inflation that ended up in the system, it's very hard to pull it back to the very least the inflation that we've seen is going to be stickier than we think.
And beyond that, that the tightness we're seeing a labor market I think is going to persist. And so it can be very hard to get that genie out of the bottle, especially like when I say when the federal governments actually want inflation to be hotter than the nominal rates, they, they want that inflation to help them bail them out of this.
So I think, I think if I was going to be stickier and longer standing with us, once investors realize that they can't raise nominal rates and real negative rates are here to stay. That's when the gold market will start to really rally and potentially when the stock market might get a bit nervous because we haven't talked about the impact of inflation on, on the companies themselves, outside of the gold market, uh, you know, companies that benefit from record margins in the last 10 years.
I mean, margins are all time record highs due to automation, technology, labor costs being very low. Those wage increases are real. Those cost pressures are real. So the margin structure of these companies are going to be dramatically affected by it as inflation. And that's a Ford looking event, right? If I should just start to pick it up the last three, four months, looking out the next year, your margins of some major companies are going to be a major pressure by the wage pressures.
The cost pressures are going to be flowing through their income statements is a major negative for the market. The, um, the tax rates I see going up in 2020. I mean, you've had a big party, a lot of, a lot of spending from federal government, subsidizing, everything you got to pay. Those bills. You saw the federal election today in Canada.
NDP is talking about a wealth tax, 2% increase some of the wealthiest income earners in Canada. And you're going to see that across the world, taxes are going up. That's going to impact the income statements and balance sheets of the companies that are trading at record high valuations. Right? The, the stimulus that we've seen spending from governments is going to taper off in 2022.
So a lot of this positive momentum we see in 2021, a lot of these fundamental things are going to reverse in 2022, or it starts to decline. And Marcus, trade-off the next incremental data point and allow the data points in 2022 are not going to look as robust as the ones that are we're starting on 29, 21.
I'm looking at the empty money. Velocity is still low by historical, um, average comparisons. And so, uh, I'm wondering why inflation is running so hot, despite low velocity of money in the system. And another argument for transitory inflation that I've heard is that potentially. The federal reserve. Once it starts tapering sometime down the line, it starts tapering its asset purchases.
We're going to see less money supply in the system. Well, not maybe less, but the growth of money supply, it will be, will be slower than before, which could potentially bring down inflationary pressure. So how could you address those two points? So the velocity of money is slower, but the total amount of money in the system is enormous.
Right? That's making that 20 20% of all us dollars are printed. The last one. 20% of us dollars ever created in the last 12 months. So yeah, the velocity's down the last he's down because you're shoving so much money through a small funnel. It's hard for that money. It's the funnels choking on the, on the amount of money being slept through it.
Right. But the amount of dollars in circulation is blowing through, you know, unbelievable record highs. Um, your, your second question was when the fed starts tapering. Yes. Okay. Well that brings us back to the beginning of our discussion today. Well, let's, let's see, show me when the fed starts tapering and show me what happens to the market, right?
So like it's a circular argument. We do a lot of circular, but the sped that, that shows you the fed is trap. There's a lot of sticky arguments in our conversation is when this starts bed star bring what happens to the market. What happens to the real estate market? What happens to the equities market?
And then what does the fed do? Right? So there's a lot of playbook things that tapers inflation tapers off. Perfect. Well, let's see what they let's see what actually happens when they start to taper. And if they have the fortitude to follow through on a tapering and digest a 50% market correction, I don't think.
Okay, well, hold up. You can't, you can't just make a state like that. 50% market correction. Not expecting to follow up on that. Let's talk about that. Let's talk about that. You kind of just slipped that in there and moved on here. No, no, no. Okay. So 50%, what would trigger a 50% market correction, tapering, not taper.
I'm talking about one or like if interest rates go to three or 4%, 10 years at three or 4%, I'll bet you a hundred bucks and a and a, and a beer that Marcus sound 40 to 50. If you take rates from one to 10 year goes from 1% to three or four. Yeah. But it wasn't like you just said that they're they're trapped, but, but you can't say inflation inflation.
This is transitory because the fed is going to taper and ease off the books here. If you want to really slow down six, 7% inflation per year. Yeah. Buying less, buying less treasuries and keeping rates at zero. Right. It's not going to do the trick. You know, Volcker in the seventies had to go all out war to bring it up.
I'm not saying inflation is where it was in the seventies. Those of you that read history and look through that. It was all at war to bring inflation under control, right? It's not a tapering that taking the bounce sheet down from nine and a half trillion, not even buying less bonds, still increasing the bouncy, but at a slower rate, that's not going to help if you want to really bring inflation in line and it's not transitory, you're gonna need some serious rate hikes and that kind of rate hikes to bring inflation back in line.
You're talking about 50% correction. I mean, run your models on all these companies at three, 4% risk-free rate the evaluations get obliterated, especially in the tech sector and high-flying sectors. They'll get completely denied. Okay. Uh, but you said more likely than not. They're just going to raise it by 25 basis points.
Would that have any significant market impact? Yeah, I think it will cause a massive panic in the market. Maybe, like I said, a 10, 20, 30% correction that when, especially if it comes early to people think, and that, that one, you know, panic, that people will see typically the federal will crawl back under its rock and get scared and, and say, okay, we're done.
We're not doing any more. Or we're back buying bonds are going to be intervening. Cause we have to stabilize the income. That that's my point is that they they'll do it baby step to see, but investors think the baby step will be just part of a normal fed normalization of interest rates of economic cycle.
And I think this time it's going to be very, very difficult for them to do that. So there's 50% market correction. Obviously it's not going to happen tomorrow because you're implies a three, 4% interest rate, which you've argued several times. Now it's a, the fed really can't do that at this point. Um, That's the gun to the Fed's head that that's, that's the, if you want to tackle inflation, you want to normalize rates and you want to normalize your essence.
That that is the, that's what they're going to have to weigh in the back of their minds. You're not going to take rates from zero to 3% and one moves you'll do 25 basis points and you'll see the impact. And like I said, I'm just, I'm just showing these illustrative scenarios, help people understand the game theory of the possibilities that could happen in that kind of scenario.
And that's why I think the fed is extremely trapped where they are today. What would happen to gold? If stocks dropped 50 points? Yes, that's my other, my other arguments that so gold, if gold gets, if market get Tamar by 50%, first of all, hardly anybody owns gold. So in a, in a panic, when you run for the exit in the crowded theater, if there's 500 people in a theater, there's only one door, right?
It's very hard to get out so that the high flying overcrowded over owned, you know, over spec, that of Leone sectors we'll get, we've got annihilated. So in a 50% correction, I think, you know, the high speculative stocks will be down 80. The overall market might be down. Gold might be down five, 10%. That's typically what you'll see.
Gold will be down five, 10%, which is significantly better than the 50% 80% you'll lose your speculative stuff, the on your portfolio. And then we'll, you'll see as golden rebound very, very quickly gold might regain its value back to par within three, four months of a correction. When the market realizes the fed is, has made a mistake at that point, the rest of the sectors that got obliterated may take years to recover like you saw in 2001 or 2008.
Right? So that's why for me, what my view of the market is, I have majority of my money in gold and gold equities. I see this correction coming. I see the fed being trapped. I mean, they're going to make a lot of money on my gold because people realize the fed is trapping. Can't raise rates, or if they do go too far and get too aggressive, my wealth will be preserved to a significant degree while others will be facing significant pain.
It's not so much feminine ones making money today and partying and making lots of money on the back of the stocks. But when, when the storm comes, you want to be well positioned for that. So let me just recap before we move on to the miners now. So you're saying. Best case scenario for the stock markets.
You've got a 25% basis point rate hike sometime next year, that would be bad for the stocks by the order of 10, 20% correction, worst case, quote unquote, if view, put a gun to the Fed's head and says and say to them, you have to fix inflation right now rates go to 3, 4, 3, 4, maybe 5%. You're looking at a 50% correction.
So it's bad either way for stock investors is your thesis. That's my, I, I, I'm an institutional investor. I'm not, I'm not. Bold bugs for life. Pet people have invested institutionally for 20 plus years. I've owned auto stocks, banks, industrials restaurants. I've been at all across the board. I'm making an active decision to have the majority of my wealth preserve my own wealth in the gold and gold equity sector.
I'm not one of those bold bucks will love gold all the time. I look at the spectrum of opportunities in the market right now, and I think gold is one of the most unloved, most attractive, fundamental evaluate sectors on a cashflow basis on evaluation. And the rest of the market is quite terrifying to me, to be honest with you.
I don't see a lot of value in the market other than day trading and quick trades, but for fundamental six months, a year out, or two year long investors or longer, this market is very perilous to me.
Okay.