Misery Index Vs. Forward P/E Ratio Vs. Gold

The misery index is the sum of the unemployment rate and the inflation rate. It can be very useful to predict the forward P/E ratio (price/expected earnings). The misery index has been falling since 2010 till 2015.

The lower the misery index (blue chart), the higher the P/E ratio (red chart), which means stocks get valued higher. A low misery index might explain why in 2014, stock prices were valued that high.

Another correlation is that between the misery index and gold. The more misery, the higher the gold price.

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Red Alert: Gold Forward Rates Turn Negative

As I told before, the only parameter that is going to dictate gold lease rates, is the GOFO rate, because the Federal Reserve will always keep the fed funds rate at zero, which means the LIBOR rate will stay at zero. 

The GOFO rate though, is dependant on the demand and supply mechanics of gold. And today we have the first time that the GOFO rate actually turned negative, which is officially a backwardation in gold. Since the 2008 crisis hit us, the GOFO rate has never been negative, so this is a premiere. As a matter of fact, we have never seen a negative GOFO rate in a decade or more. (except for those few days in 2008 which are ignorable)

Once such events happen, we will see a huge shortage coming in gold.

Chart 1: LBMA GOFO rate turns negative

And the subsequent rise in lease rates: