The Week in Solar Stocks: Impossible Germany

NEW YORK ( TheStreet) -- I'm pretty sure the rock band Wilco's lead songwriter Jeff Tweedy was not referring to some frustrating investments he made in solar stocks when composing lyrics for the song "Impossible Germany," but the last few weeks' action in solar stocks suggests that the title works pretty well for the alternative energy sector.

In the past week, "Germany to Kill Solar!" headlines hit the wires. This was, notably, one week after the "Germany Saves Solar!" headlines led solar stocks higher . Ionesco and Beckett would be hard pressed to create theater as absurd as the solar sector trading often presents for the investing public.

To recap: German demand in the fourth quarter of 2011 wildly surpassed expectations, with a demand frenzy ahead of 2012 annual subsidy cuts and cheaper-than-ever solar panel prices leading to what would be a few years' worth of installations for much of the world in a few months in Germany. That in turn led to bullish calls from Wall Street that the left-for-dead solar sector was back, and in Wall Street parlance, the shares oversold.

And that's not all.

The fact that Germany had installed 3.5 gigawatts of solar in the fourth quarter for a grand total of 7.5 gigawatts in 2011 would, no doubt, lead the Germany government to conclude -- for the umpteenth time -- that its method of slowing the growth of solar through gradual subsidy reductions wasn't working.

As such, Germany would have to take an even harder line against solar in 2012, but (always a "but" when politicians are involved) that harder line would probably take half the year to define by the German parliament and as such, the demand frenzy in Germany would continue through the first half of 2012, with one last boom fueled by the fear of the subsidy cuts to come.

Look up tortured logic in the dictionary and you might find German solar market supply/demand dynamics and German solar subsidy policy as listings number one and two.

Fast forward to this past week when the German hard line had already been set - at least according to Bloomberg, which reported that German Environmental Minister Norbert Roettgen (who has historically been an avid proponent for the solar industry) put in place an overhaul to Germany's current solar incentive scheme, moving to monthly vs. bi-annual cuts.

Solar shares tanked.

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