Kass: Don't Count on a Second-Half Rebound

These blog posts originally appeared on RealMoney Silver on April 24.

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7:33 a.m. EDT

"Earlier expectations have turned out to be optimistic, and the environment continued to deteriorate."

-- Michael Callan, Ambac (yesterday's first-quarter 2008 conference call)

Thanks, Mike. Helpful, really helpful.

Yesterday, monoline bond insurer Ambac's ABK shares dropped by nearly 50%, to close at $3.46 per share, after losing almost $12.00 per share, or $1.6 billion, in the recently completed first quarter.

Remember Ambac's management has consistently blamed short sellers for the company's problems. Of course, the joke (on investors) remains that Ambac still has an AAA rating.

Yesterday's shortfall helps to explain the still sloppy share price action in the financial sector. It also helps to explain why I continue to remain a market skeptic, why I rarely take for face value corporate managers' opinions and forecasts and why I don't let share prices (of the broad market or of specific companies) shape my fundamental views. I try to do the opposite.

"We see no signs of economic strengthening in the second quarter."

-- Kurt Kuehn, UPS CFO (yesterday's first-quarter 2008 conference call)

For those who think that Ambac's woes and the woes of the broader financial sector are ring-fenced and isolated, consider that United Parcel Service's UPS first-quarter volume declined -- only the eighth time in its 100-year history.

It is for these reasons and many more that a second-half economic rebound is looking more unreasonable.

The Sunshine Boys were out in full force last night on "Kudlow & Company," and the content of the show continues to be proof positive that too many worship at the altar of price momentum rather than, as they should, at the altar of fundamentals, which, from my perch, are eroding.

Like Warner Wolf used to say, let's go to the tapes of last night's "Kudlow & Company."