Yesterday the solar stocks sold off on an analyst report crying wolf about a huge reduction in German solar subsidies - frankly that speculation has been out there for a long date for anyone who actually keeps up with the sector; in fact we touched on that a week and a half ago [May 21: Who is the World’s Largest Merchandise Exporter? Not China. Or the US] But since Wall Street is a spoon fed world, until an analyst brings it up, it is not on their radar (whoa, there could be cuts in subsidies? Sell sell sell!). Frankly, every moment similar news regarding potential cuts or lack of progress in that subsidy or that subsidy - whether it be from Spain, Germany or even the US (who is not even a material solar market) - these stocks sell off. Being in these stocks for by a year and half, it is like groundhog day - every 6-8 weeks the “same” news is trotted out, panic selling ensues, the sky is falling crowd comes out, and soon after the story goes away. next it’s brought out again 2 months later. And the same pattern repeats.

Anyhow, after yesterday’s spooky man under the bed was brought out, overnight we saw a reality check - the subsidy cuts (LONG expected) are going to be far tamer than the speculation brought to bear by the analyst community. that is a net positive considering it provides us with a road map of what the German market will be for the next few years, and “bad news” (not that that was poor in my book) is always better than uncertainty on Wall Street. Now we can move on to hand wringing about Spain in a few months. The one I have to laugh at is the panic selling by Congress and Presidential lack of action on US subsidies. The market here is so pitiful and most of these names sell nearly nothing to the

US market - it’s a non issue. But that doesn’t stop the stocks from selling off 15-25% each duration the U.S. bill “stalls”. Farm subsidies? They pass like a knife through warm butter. But a pittance thrown towards solar subsidy? Nah, we are gonna fight that one tooth and nail. You see, there is no dominant solar lobby - so hence no urgency to pass any legislation. Big oil? Big agriculture? Plenty of lobbying capability there. That’s all that matters in US Government 101.

• Germany’s ruling parties have reached a deal to reduce support for the solar energy sector by 8 percent in 2009 and 2010 (and 9% in 2011), far less than the booming industry had feared.
• …the deal came in lower than the 30 percent decrease in 2009 some German conservatives had pushed for.
• German law requires utilities to pay solar energy producers higher prices for solar potential they put into the grid than capability from traditional sources. The government says the industry can live with less support and wants to redirect help to other types of renewable energy.
• The cuts concern support for rooftop solar panels, which supply the lion’s share of Germany’s solar-produced energy. The decline in support for bigger installations on open fields could be slightly bigger, coalition sources said.
• “Positive for all solar companies,” Cheuvreux said in a note.
  “The cuts as from 2009 will not be as drastic as the proposed cut of up to 30 percent that was proclaimed by the (conservative) CDU/CSU faction,” Equinet said.
• In their talks on Thursday, coalition partners additionally agreed to raise the support for wind energy and biomass installations, participants at the meeting said. (meanwhile in the US? Sueing OPEC, more support for corn ethanol, etc etc - excellent work D.C.)

Short US Government

Original post by TraderMark