Vapid “liquidity” vanishes in a heart beat

Commodities and bond yields have been trending lower all day in sympathy with contracting global growth, confirmed yet again by more weak data out of China and the Euro-zone overnight, see:  China’s factories crawl and Germany’s shrink.  There is every reason to suspect the global recession begun in 2012, is continuing to spread.  The US dollar continues to attract international capital from increasingly tenuous foreign markets.

Meanwhile US stocks are so far trading in a fantasy world all of their own making.  Over the last hour we had a glimpse behind the facade of “stability” and “rational markets”.  A two line tweet at 1pm caused stocks to collapse and the mirage of liquidity to vanish in an instant.  Just after 1pm today, an apparent Tweet from the Associated Press reported “Two explosions in the White House and Barack Obama injured”.  Moments later AP announced that the Tweet was false and its account had been hacked.  But in those intervening moments, the risk trade lost all bids as prices plunged and volatility soared, see a chart of the E-mini S&P contract price movements here.     There is no stability or real liquidity to be found in the Algorithms and levered trader’s circus know as public stock markets at this juncture.   Those who have savings they wish to protect, should govern their risk exposure accordingly.

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