Lock Limit Up; Fannie Loses $13 Billion; VIX Plunges Most on Record; Goldman Sachs No Trading Losses for Entire Quarter

by noreply@blogger.com (Michael Shedlock)

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Today in response to an unprecedented $1 trillion Euro aid package (see Shock and Awe Part II; Fed Joins the Battle; Short Squeeze Coming, Then What?), futures opened lock limit up and the NYSE Invoked Rule 48 to Suspend Price Indications Before Open.

Rule 48 suspends the requirement for market makers to send pre-opening indications, or bid and ask prices developing in auctions used to determine a stock’s opening price. The regulation is used “only in those situations where the potential for extremely high market-wide volatility would likely impair floor-wide operations at the exchange,” NYSE Euronext said in an e-mail today.

VIX Plunges Record 36%

Also in response to the bailout, happy days are here again (at least for a day or two) as VIX Plunges by Record 36%.

The benchmark index for U.S. stock options plunged the most in its-two decade history after European officials unveiled a $960 billion loan plan to end the region’s sovereign-debt crisis and global stocks soared.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, fell 36 percent to 26.46 as of 9:40 a.m. in New York, retreating after a record weekly gain last week. The index measures the cost of using options as insurance against declines in the Standard & Poor’s 500 Index, which rallied the most intraday since April 2009.

Fannie Mae Loses $13 Billion Requests More Taxpayer Money

Stepping away from bailout news, we see Fannie Mae asks for more federal aid after Q1 loss

Fannie Mae, the largest U.S. residential mortgage provider, on Monday reported a net loss of $13.1 billion in the first quarter and said it tapped the Treasury for additional aid of $15.3 billion.

US taxpayers were just shellacked for another $15.3 billion.

That folks represents the real economy. Of course so does the need for a $1 trillion European bailout.

If the economy was healthy, we would not see either of these things.

Unlimited Cash 

Today Trichet offered unlimited cash to banks while noting Bond Purchases Not Supported By Whole Council

European Central Bank President Jean- Claude Trichet indicated the bank’s decision to buy government and private bonds wasn’t supported by all 22 council members.

“On some of the decisions there was unanimity, I won’t give details, and on some there was an overwhelming majority,” Trichet said in an interview with Bloomberg Television in Basel, Switzerland, today. “On bond purchases we had an overwhelming majority.” He said as recently as May 6 that the council hadn’t discussed purchasing government bonds.

In addition to buying debt securities, the ECB also said it will offer banks as much cash as they need for three months and six months and reactivate a swap line with the Federal Reserve.

Trichet supports the ECB buying government and private debt, while offering unlimited cash. Who woulda thunk that a few years ago?

It would be fitting if corporations take him up on that and then go bankrupt.

Moody’s Declines 8.1% After Disclosing ‘Wells Notice’ From SEC

Moody's is one stock not participating in today's lovefest. Bloomberg reports Moody’s Declines 8.1% After Disclosing ‘Wells Notice’ From SEC

Moody’s Corp. fell 8.1 percent to its lowest price since October after it disclosed that the U.S. Securities and Exchange Commission is considering cease-and- desist proceedings against it.

Moody’s is among credit-ratings companies that face scrutiny by Congress and state insurance regulators after it assigned top grades to U.S. subprime-mortgage bonds just before that market collapsed in 2007. The company said May 7 in a regulatory filing that it received a “Wells Notice” from the SEC in March related its application to become a nationally recognized statistical ratings company.

The SEC staff notified New York-based Moody’s on March 18 that it is weighing a recommendation to the commission that it begin administrative and cease-and-desist proceedings based on the company’s description of how it assigns credit ratings, Moody’s said in the regulatory filing.

That Wells Notice is a significant event that Moody's failed to report to shareholders. Expect shareholder lawsuits over this.

By the way, there should not be any "nationally recognized statistical ratings companies". That rating was one of the reasons we had the subprime crisis. Please see Time To Break Up The Credit Rating Cartel for details.

Perfect Quarter For Goldman Sachs Casino

Unless the game is rigged, the odds of a headline like this are zero: Goldman Sachs Has First Perfect Quarter With Zero Trading Loss

Goldman Sachs Group Inc.’s traders made money every single day of the first quarter, a feat the firm has never accomplished before.

Daily trading net revenue was $25 million or higher in all of the first quarter’s 63 trading days, New York-based Goldman Sachs reported in a filing with the U.S. Securities and Exchange Commission today. The firm reaped more than $100 million on 35 of the days, or more than half the time.

Making $100 million a day for half the days in the quarter is quite a feat.

The only way I can possibly see that happening is if Goldman Sachs is front-running every "trade". If someone has another explanation, let's have it.

Regardless of the explanation, legal or not, Goldman Sachs is clearly a hedge fund (if not the entire casino) not a bank. It should be broken up.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com