Two weeks ago, I lambasted the markets’ infatuation with all things China-solar, particularly Yingli Green Energy (YGE) and Trina Solar Ltd. (TSL) as paragons of market mispricing. (Two weeks ago, Yingli had a P/E ratio of 285, Trina Solar 80.)
Forecasting is a tricky business, and we forecasters get so many things wrong that it’s vital to trumpet the things we get right. In this instance, I called peaks for YGE and TSL at P/Es of 285 and 81, respectively. Both companies have since lost over 10 percent of their market capitalization: YGE’s P/E is now 255, and Trina Solar has dropped $250 million of market capitalization and now has a P/E of “only” 65.
It also appears that policymakers, whose zeal for carbon-capping energy mandates, costs and taxes is not shared by the general population, have decided to shelve renewable-energy legislation for the time being. While only the political-intelligence brokerage shops are privy to that kind of information (as far as I know), the congressional Democrats, even with potential moderate Republican switch-hitting, are unable to press ahead with green subsidies for a simple reason: the approval rating of Congress is lower than that of George W. Bush. (I know. I didn’t think it was possible either.) Congress will have enough work to do passing popular legislation, to say nothing of any conceivable carbon-cap or emissions-trading framework.
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