Mid-tier bonds ("Mittelstandsanleihen") in Germany

In the prevailing low interest environment in German so called Mittelstandsanleihen are being increasingly offered. Those are bonds my small/mid-tier companies, often with a well recognized name and good reputation for a narrow industry niche.
The bond volume is usually max. 60 million EUR with a coupon of 6%-8% p.a. In fact all the bonds I could have purchased since September 2012 were Mittelstandsanleihen.
I strongly discourage anyone to invest into those bonds, chances are high that at least some of the money will go for good.
The companies usually lack equity capitalization and due to the new  „Gesetz zur weiteren Erleichterung der Sanierung von Unternehmen“ (ESUG) a debt to equity swap and a higher haircut for bondholders is easier for companies to enforce. Management now has 3 months time for putting a plan together, they can also group stakeholders into different pools. The plan is accepted if the majority of pools accept it. Accordingly management has a strong incentive to balance the groups in a way that they split the votes of people that are likely to oppose the plan (such as bondholders).
For German readers i recommend this very interesting article on WiWo.

However in my opinion the prime of Mittelstandsanleihen has passed, they are under a lot of scrutiny by the media, especially by financial press. A quick internet search will find loads of bad publicity.

I receive a daily newsletter Finance Today by German paper Handelsblatt. For one whole week the newsletter featured a flashy ad for such a Mittelstandsanleihe by Gamigo.
That made me wondering if the will also feature the negative articles about the SME bonds they published online/in print in their newsletter.
Well they did (good!):

Blog recommendation: The Grumpy Old Accountants

On The Grumpy Old Accountants readers can regularly read about the quality of auditing an accounting, an important if not the most important issue for all investors.
The latest post  that i found particularly interesting is about Sam E. Antar, cousin of Crazy Eddie, and the effectiveness of "ethic lessons" for auditors and students.
He argues that the capital markets attracts the 10% "of the public is absolutely unethical and incapable of behavioral change". He is skeptical that auditors with the regular middle-class background will be able to detect the true intentions of such highly educated and ruthless scammers as Sam Antar.
I agree with his conclusions and find this a really interesting argument besides the usual stuff, such as conflict of interest, etc.

I also definitely recommend you to read the articles about Groupon and their accounting.
In my opinion investors can learn a lot by trying to stay up to date with accounting regulations and their consequences. I might be biased since I study a lot of accounting myself however sounds knowledge is necessary in order to evaluate the most important documents (financial statements). This holds especially true in times of ever increasing importance of goodwill, deferred taxes and fair value accounting combined with the management approach favored by standard setters.

Analyst Recommendation and Stock Performance: Performance Mai 2013 (Pt. 09)

Mai 2013 was interestingly a strong month for both the best-basket (+5,2%) and the DAX (+5,5%) index.
I say interestingly because the best-basket mainly constitutes of US companies.
Indeed when running a correlation of the mtm changes correlation seems to be the least btw. best-basket and DJ.
This is the correlation matrix:

Korrelation	Best 12	Worst 12
DAX	0,25	0,41
DJ	0,38	0,65

Drivers in the best basket was Valeo SA, Gran Tierra and Check Point Software.

This is the monthly track record: In absolute terms since incarnation the DAX index clearly outperformed all other indexes. Best-Basket recovered a bit but is still way off all other indexes. The development since incarnation:

Analyst Recommendation and Stock Performance: Performance April 2013 (Pt. 08)

While the DAX and the DJ developed similarly throughout April (+1,5/+1,8%) the Best- and Worst-Baskets deviated stronger drifting away from each other again.

The Best-Basket took a big hit, mtm performance was -5,9%, mainly attributable to Lynas and Goldcorp. Additionally only 3 out of the 12 stocks showed a positive performance at all.
On the other hand the Worst-Basket increased by a 1,4%, mainly due to a 67% (!) increase at First Solar.

Again i has to be noted that standard deviation of the Worst-Portfolio was considerable higher than the Best-Basket (24% vs. 6,5%).

Lets come to the charts, starting with mtm performances:
Although the Best-Basket is mainly composed by US-stocks, the favorable overall US-market doesn't seem to have much an influence on the performance of the basket. This might indicate a low market influence on individual stocks in the US, which could be attributed to low information asymmetries.

The total performance shows impressively the fall of the Best-Basket after 3 months of catching up:

The pink bar is the DJ, as usual.

Deutsche Wirtschafts Nachrichten (DWN) or: To stupid to translate a graphic

Today a facebook "friend" of mine posted the following article:
http://deutsche-wirtschafts-nachrichten.de/2013/05/13/die-stunde-der-krisen-profiteure-deutsche-bank-erwartet-bank-sterben-in-europa/
The content is about the consolidation process in the banking industry, but thats not the point.
They introduced a graphic from an source called "EBF" (i.e. European Banking Federation?).
Problem is this graphic is in English.

How they translate the graphic (left of bars to grey shaded area ):
Deposits - Kredite (i.e. loans)
Loans - Eigenkapital (i.e. equity)

The rest is correct. Out of the 18 comments this piece has so far, non is going beyond the usual propagandistic comments from braindeads.
To be clear: Those translation errors do not contradict the "analysis".
Yet it is telling a story about the quality of those "news" coming from such websites and alike.

This "news agency" is well known for alarmistic reports usually about the Euro or the banking system, etc. It tries to camouflage its tendentious content with a professional interface and name. Deutsche Wirtschafts Nachrichten translates into something like German Business News.
Now the media company behind this is Blogform Social Media. I don't think the authors/editors for this page are motived by idealogical reason. They probably try to serve the increasingly popular niche of gold/silver fan boys, banking system critics, conspiracy theorists and the like.

A big fuss about a little mistake- probably yes. However I'm worried about the increasing number of those "news" websites. People do not seem able to fully understand that such sources are not very reliable nor neutral (not even trying to be that is).
Our (German) business papers are already weak from a quality point in my opinion, so there is no need to further drag it down. There are blogs that cover more interesting/detailed research than newspapers.
But in the end it is: You get what you payed for I guess.

Deutsche Bank: Capital Raise - Best Practise?

Today Deutsche Bank surprisingly announced a capital raise of 2.8 billion EUR together with better than expected Q1 results.
The media as well as investors (+ 6% today) reacted very positive towards those plans and the earnings.

I believe that it was very well done by Fitschen/Jain:
What did Deutsche Bank do: Outstanding shares are 929 mn, new shares of 90 mn will be issued to institutional investors. They stay closely under 10% increase in share count. This enables them to not offer subscription rights to all existing shareholders.

• Existing shareholders suffer a dilution of 10% without rights issue.

They executed the sell of the new stocks on this Tuesday. Stock is now at almost 35 EUR/share after positive results.  However the selling price of the new stocks was 32.90 EUR, that is a discount of 2,1 EUR or 6%.

• New shares were sold at a discount exclusively to institutional investors.

To conclude: The share issuance was well and swift done to the disadvantage of small/"retail" shareholders, yet they do not seem to realize.

Only a  low than 10% capital increase could have been announced and executed in such a fast manner - it took only 1 day.
Why this haste - maybe because the Q1 results are not so good after all. Provisions, anyone?

Update: According to this article Deutsche Bank received 2.96 bn new capital from 90 mn shares.
So that makes 32.88 EUR/share, not the 31.11 EUR they originally planned with.

Analyst Recommendation and Stock Performance: Performance Feb+Mar (Pt. 07)

After a long holiday, i finally come up with the seventh part of my little "field study" about the meaningfulness of (sell-side!) analysts recommendations.

The situation of the two portfolios changed quite a bit.
In February and March the Best-Portfolio together with DJ-Index clearly outrun the Worst-Basket. In general there seems to be a strong correlation between the DJ-Index and the Best-Basket. Indeed  US-American stocks are prevailing in the best basket, the worst-basket seems is more European influenced.

Despite the improved performance of the Best-basket during the latest two month, the Worst-Basket is still stronger.
The Worst-Basket really took a big hit in February.
It seems important to notice, that the standard deviation of the Worst-Basket is much higher, for me a evidence of the importance of diversification among the worst-rated securities.