The swoon in solar company stocks has certainly vindicated short sellers.
Numerous high-profile fund managers were shorting solar stocks, including Jim Chanos. The performance of solar stocks in 2011 has been abysmal.
For example, First Solar (FSLR, Financial) is down 65% and LDK Solar (LDK, Financial) is down almost 90%, making the sector one of the worst performing sectors of the market in 2011.
Chanos was most focused on the fact that austerity measures in Europe would end subsidies and state level purchases of solar equipment.
However, the core problem in 2011 appears to be massive over supply in the market.
Bloomberg reported that “the solar-equipment industry has begun its biggest consolidation in at least two years as photovoltaic systems plunge in price, forcing weaker companies to team with competitors or close shop."
Giant government subsidies have actually created part of the problem. For example, Obama’s ill-fated support for Solyndra shows how cheap government money “crowded out” the private sector and created an inventory surplus and falling prices. Clear evidence of the oversupply was the fact that vendors were offering customer financing for less than 1.5%. It comes as no surprise that Solyndra recently filed for bankruptcy.
Yet again, the vilified short sellers were the first to notice problems in an industry that was more hype than substance.
Numerous high-profile fund managers were shorting solar stocks, including Jim Chanos. The performance of solar stocks in 2011 has been abysmal.
For example, First Solar (FSLR, Financial) is down 65% and LDK Solar (LDK, Financial) is down almost 90%, making the sector one of the worst performing sectors of the market in 2011.
Chanos was most focused on the fact that austerity measures in Europe would end subsidies and state level purchases of solar equipment.
However, the core problem in 2011 appears to be massive over supply in the market.
Bloomberg reported that “the solar-equipment industry has begun its biggest consolidation in at least two years as photovoltaic systems plunge in price, forcing weaker companies to team with competitors or close shop."
Giant government subsidies have actually created part of the problem. For example, Obama’s ill-fated support for Solyndra shows how cheap government money “crowded out” the private sector and created an inventory surplus and falling prices. Clear evidence of the oversupply was the fact that vendors were offering customer financing for less than 1.5%. It comes as no surprise that Solyndra recently filed for bankruptcy.
Yet again, the vilified short sellers were the first to notice problems in an industry that was more hype than substance.
