Yesterday’s selloff on Wall Street was attributed to disappointment over consumer spending data that suggest a hoped-for surge in recent weeks is looking more like a blip. Who could possibly have believed the economy was returning to life in the first place?  Actually, one guy does come to mind – our telegenic friend Larry Kudlow — but we suspect that even he didn’t really buy into the “green shoots” story – other, perhaps, than as a metaphor that engaged the fancy of credulous news editors for a few short weeks. There’s The Wall Street Journal, for one, where editors have found reason to celebrate an uptick in retail sales even when it has been caused mainly by rising gasoline prices.  But the Journal is hardly alone in trying to turn every clump of statistical crabgrass into a putting green. Virtually every major newspaper in America seems to believe – fervently – that a rising stock market is telling us everything will turn out okay for the economy.

What amazes us most is that the reporters who push this fantastic story line are themselves in danger of extinction because of collapsing advertising revenues. Under the circumstances, you’d think they might have a pretty sensitive nose for downbeat news. In fact, it would appear they’d rather trust a short-squeeze rally on Wall Street than their own lying eyes.  Aren’t they surrounded, like the rest of us, by homes worth less than they are mortgaged for?  Don’t they talk to friends who are struggling harder than ever to pay the bills?  Isn’t the local mall deserted and pock-marked with vacancies?

 Bullion’s Dive No Threat

An innocent bystander in yesterday’s carnage was bullion, which dove for the second straight day. We’d anticipated the weakness but told subscribers not to worry:  A selloff in Comex Gold, we wrote in the touts section of Rick’s Picks, “would foreshadow not some killer leg down, but more likely yet another period of lazy buoyancy at a somewhat lower level.”  If Gold quotes were to fall now by another $50, we’d still be unconcerned.  Specifically, the December contract would have to plummet all the way to $809 to turn the daily chart even mildly bearish; it settled yesterday around $936. Similarly, although September Silver got hit hard, falling 72 cents, or five percent, it would have to drop a further 15 percent, to 11.826, to raise a red flag. Under the circumstances, we’ll be looking to rebuild a bullish position in Silver Wheaton, since we closed out some winning option time-spreads on Friday as the stock was topping, presumably for the near term. 

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