June 18, 2009 (FinancialWire) (By Philip Holmes) — FedEx (NYSE: FDX) disappointed the Street by forecasting a Q1 EPS of $0.30 to $0.45, vs. $1.23 last year. The company posted Q4 earnings per share of $0.64. That’s down from $1.45 last year.

The Street was also bothered by President Barack Obama, who proposed a new regulatory regime for U.S. financial institutions. The president wants to eliminate one federal bank regulatory agency and create what BusinessWeek calls “new overseers for big-picture economic risk and consumer financial product safety.”

That last bit would be nice, up to a point. Simple things like insisting on tried-and-true underwriting guidelines for mortgages, (such as finding out how much an applicant actually earns before approval), and applying some debt-to-income standards accordingly, would have prevented a lot of the carnage we now see.

But how politicized would this post be? Dumb question, really, given the success the Bush administration had at bringing everyone from the GAO to Fish and Wildlife to heel during its two terms in office. A BAD “Risk Tsar” could do more harm than no risk tsar.

While we discuss the pros and cons, California burns. Not literally, for a change, but in terms of fiscal and economic well-being. The state’s budget is $24 billion in the red, its bonds are rated as junk and its legislature seems unable to do anything to correct things. Lately, the state has taken to beseeching the feds for a bailout, claiming that California’s economy is too big to fail. BusinessWeek’s Moira Herbst says that, so far, the Obama administration doesn’t think so.

In her article on the subject, Herbst said “there remains concern that the deeper California’s woes get, the more it will delay the potential U.S. recovery.” The “lesser” fear is that California will deal with its problems through massive cutbacks in spending, which would send unemployment sharply higher in the world’s sixth largest economy. This works against an overall U.S. recovery.

A potentially greater fear is that California will default on its massive debt, triggering similar moves by other states and numerous counties and municipalities. Herbst says that, “few experts think California will default on its debt, following the example New York City set in 1975 and Cleveland in 1978…”

But what about Orange County in 1994? Then, a famously affluent county in California defaulted on a $110 million bond issue. Orange County will be ground zero of the upcoming “Alt-A” resets, and already has more than its share of unsold condos and near-abandoned commercial real estate.

Who knows? As a resident of the state I’d put the chances of default a lot higher than Herbst’s sources. Too many Prop 13′y tax haters-the type who recalled Gray Davis to install Arnold Schwarzenegger as governor in part (large part, if you caught the vibe at the time) because Davis was threatening to raise the tax on car registrations. (You aren’t too mad about an Enron-led electricity crisis if you put a Republican in office, right?)

Yes, that’s how silly this state is. Billions in new spending approved directly by voters each election cycle on promises of “no new taxes”. Each initiative funded by bond floats. Threaten to raise taxes and the BMW’s are at the Bastille, Xenon torches lit.

The Investrend Economics Calendar lists Weekly Initial Jobless Claims (8:30 a.m.), Philadelphia Fed Index for June (10 a.m.), Leading Indicators Index for May (10 a.m.), Treasury announces 2, 5 & 7-year note auctions (11 a.m.).

The Investrend Events Calendar showcases AAP Investor Day; ACAP, FNB, THG, AF at Fox-Pitt, Kelton Small & Mid-Cap Bank and Insurance Conference; MTW, TEX, BMI at WJB Capital Group Milwaukee Industrial Bus Tour; VPHM, CELG, ALNY, AUXL at Jefferies & Co. Healthcare Conference.

The Investrend Money Index is an indicator of the depth of market direction or indirection. While not always including the same stocks, the NYSE/NASDAQ 50 Most Actives indicate the direction in which the mass of money is flowing. Last session’s trading showed 20 advancers versus 30 decliners. Advancers were led by Savient Pharmaceuticals Inc (NASDAQ: SVNT) up 36.03%, Financial Bear 3x (NYSE: FAZ) up 6.52%, Matrixx Initiatives Inc. (NASDAQ: MTXX) up 6.06%. Decliners followed Star Scientific, Inc. (NASDAQ: STSI) down 73.16%, E*Trade Financial Corporation (NASDAQ: ETFC) down 11.52%, Cell Therapeutics, Inc. (NASDAQ: CTIC) down 9.03%, Keycorp (NYSE: KEY) down 7.77%, Financial Bull 3x (NYSE: FAS) down 6.80%, Regions Financial Cp (NYSE: RF) down 6.12%, Sprint Nxtel Cp (NYSE: S) down 6.07%.

Vote in the Investrend Poll Question of the Day at Investrend Information (http://www.investrendinformation.com).

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Quote of the Day: “One of the soundest rules to remember when making forecasts in the field of economics is that whatever is to happen is happening already.” Sylvia Porter

Today is: Recess At Work Day.

Happy Birthday: William Henry Seward, Jr., E.W. Scripps, James Montgomery Flagg, Jeanette MacDonald, Sylvia Porter, Keye Luke, Bud Collyer, E.G. Marshall, Sammy Cahn, Lou Brock, Richard Boone, Roger Ebert, Sir Paul McCartney, Kurt Browning.

Today in History: Five Canterbury monks saw in 1178 what was possibly the Giordano Bruno crater being formed. The Parliament of Ireland met in 1264 at Castledermot in County Kildare, the first definitively known meeting of this Irish legislature. French forces under the leadership of Joan of Arc crushed the main English army under Sir John Fastolf at the Battle of Patay in 1429, turning the tide of the Hundred Years’ War. Samuel Wallis, an English sea captain, sighted Tahiti in 1767 and is considered the first European to reach the island. Susan B. Anthony was fined $100 in 1873 for attempting to vote in the 1872 presidential election. Empress Dowager Longyu of China in 1900 ordered all foreigners killed, including foreign diplomats and their families. Checker Cab put its first taxi on the streets in 1923. Aviator Amelia Earhart became the first woman passenger to fly in an aircraft across the Atlantic Ocean in 1928.

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