LDK Solar - December wild ride

LDK Solar is a great stock to follow in Google Finance Discussions. It is hilarious to read what people are saying on the discussion board in terms of predictions or even reasons why this stock was going to bust through the roof with nary a pause after the audit report comes up clean.

Even after the audit report cleared LDK of any accounting foul play, LDK never reached it's pre-SEC investigation level of $75 and continued to slide slightly as everyone waited for them to post 3rd quarter earnings results.

The key to predicting that this stock wasn't going to beat earnings was that it never surpassed pre-investigation price and continued to slide after the audit report came clean. Squeaky clean even. Why wouldn't the price surpass it's previous high before the investigation? Because the market was saying: I don't have confidence that they're going to pull a First Solar and shatter earnings predictions like a balsam wood model bi-plane vs. a Louisville Slugger.

The market has information, hidden in each little movement. It's all about information. Those who have it, profit from its pure essence of value. Knowing that the earnings report was not going to beat expectations was a license to print money.

All those short sellers, to the tune of something ridiculous like an 8th of the entire pool of outstanding shares, were saying something. And there were plenty on the Google Finance discussion boards that weren't listening at all. Do you think that all of these sophisticated traders and their pocketbooks were wrong? That they were somehow illogical and irrational in thinking that LDK would tumble big after they did not beat earnings?

Sorry, but, you've got one hell of an ego to think that you know better than the market. When I say the market, I mean the market sentiment. It's the collective knowledge surrounding a stock. A composite of all that is known about a stock, information obtained legally or otherwise.

The lesson learned from LDK solar: listen to the market, ignore the vocal minority. Listen to that huge background noise whispering: massacre after earnings are released. The vocal minority that use message boards like those found at Google Finance and Yahoo Finance are speaking to ease their worries and anxiety about what will happen. If you think about it, they are the vocal few who do not have privileged information. If they did, they would keep it for themselves and profit from it. This past month with LDK solar is a perfect example of this.

There are still some on that board who speak of LDK hitting 80 by Friday, Dec. 22. It must be great to live in that dream world, where every wish came true. There is lots of noise about how all the shorts are going to have to cover and thus the buying demand will rocket the price of LDK up to stratospheric levels. Except... that's not going to happen when you have the majority of the shareholders who did not have privileged information offloading the stock like it's last year's hottest fashion trend (which now stinks to high heaven). The price will only go up if there is no group willing to unload the stock. And after that barely sufficient earnings report, there's going to be a boat load of people willing to drop that stock in a hurry.

Good luck to all on LDK hitting 80 in 30 hours time. But, I wouldn't hold your breath.