Sleepy Pete’s Introduction Piece

Welcome to Sleepy Pete’s Yield Stand. Sleepy Pete’s is the corner of TSPS where we look for ideas in the fixed income or bond market.

Like a stock ticker symbol (Apple is APPL), bonds have CUSIPs. A CUSIP Is the unique identification for a particular bond. For example, Apple 3.45% bonds maturing X/Y/20xx is 123456AA7. A fixed income investor can purchase these individual cusips and create a fixed income portfolio just like a collection of stocks is an equity portfolio. Assembling a collection of cusips is time consuming however. The investor must analyze each cusip for its credit-worthiness, coupon payment, maturity date, etc. That is why these days fixed income investing usually involves purchasing a fixed income ETF or a US Treasury obligation directly from the feds. An ETF is a package of cusips just like an equity ETF is a collection of stocks. This limits the investor to cusips chosen by the manager of the ETF.

Sleepy Pete thinks that is all fine and dandy and will probably keep you out of trouble with the church’s investment board. Sleepy Pete also feels that if you’re coming in to The StockPawnshop, you’re the kind of person who may feel the church’s investment portfolio could use a little jet fuel if it’s ever going to send the youth group to Guatemala again. Sleepy Pete welcomes you, the fixed income investor looking for a little kick.

But first off, let’s go over Sleepy Pete’s Operating Principles

Here at Sleepy Pete’s we take the fixed income world and we look for alpha. The same alpha as in equitys, that is, a spread in excess of the market. The “market” in this case would be the ETF/UST direct game. Totally fine for most folks. But most folks aren’t coming into the Stock Pawnshop. Sleepy Pete is here to help you, the bargain hunter off of the beaten path, find a steal or two.

Here at Sleepy Pete’s we feel that the municipal bond market is the fixed income sector with the most intrinsic alpha.

HOWEVER, here at Sleepy Pete’s we are fully aware of the veal chop of tax-exemption hanging off the sector’s neck, and if a DOGE is descended from wolves, there’s a wolf named Ballz, that has a taste.

Here at Sleepy Pete’s a baseline assumption would be that the municipal bond tax-exemption is grandfathered, but Sleepy Pete never saw the Melania coin coming either.

Here at Sleepy Pete’s we feel “alpha” in the fixed income world can be gathered through 2 sources: structure, or credit.

By structure, Sleepy Pete takes the standard parameters of a “bond” : interest rate, interest payment dates, maturity date, and any bells and whistles attached. Gaining alpha within the structure of a bond is taking advantage of mispriced options (or bells and whistles)

embedded within a cusip. Not all bonds are issued with a clean and simple non- callable structure. Many are issued with calls, puts, coupon payment adjustability (floating rate, index-based, etc) attached. Oftentimes these callas or puts are mispriced. Gaining alpha in this sense would be take a side of the trade that takes advantage of this mispricing.

By the way, here at Sleepy Pete’s we don’t espouse directly shorting something. This is due to a number of reasons. In the case of municipal bonds, this creates a tax mess as Uncle Sam is not fond of some piker in his basement creating tax free income at his Schwab terminal. In other cases the short may not be covered easily.

Shorting something in fixed income is also mechanically difficult and best left for people wearing clothes to work each day.

However, Sleepy Pete is not above buying puts on a schmoo-riddled ETF if the occasion arises.

Here at Sleepy Pete’s we also look for alpha by credit analysis. Some bonds are mightier than they look. They may have credit guarantees that are not immediately visible. The credit itself may not be appropriately priced. Sleepy Pete wakes up for a good bargain.

Here at Sleepy Pete’s, when we have a trade idea Sleepy Pete gives you the actual cusip. No more of this nebulous “I like 15 year Industrials” Leaving you, our valued patron, looking up Honeywell debentures on the internet. Sleepy Pete will give you the actual cusip. Rev up your Schwab account and have at it.

NEWSLETTER DISCLAIMER

The Stock Pawnshop newsletter (“Newsletter”) should not be construed as investment advice. The Newsletter is for entertainment purposes only. Antimony Isle, LLC, its owners or affiliates, do not make any representations or warranties, express or implied, about the Newsletter’s accuracy, completeness, or correctness. The information in the Newsletter may become outdated and there is no obligation to update any such information. The information contained in the Newsletter is not intended to constitute legal, accounting or tax advice or individually-tailored investment advice and is not designed to meet your personal financial situation. The investments discussed in the Newsletter may not be suitable for you. This Newsletter should not be construed as a solicitation to act as securities broker or dealer. Antimony Isle, LLC and its owners and affiliates may hold or acquire securities covered in this Newsletter and may purchase or sell such securities at any time, including security positions that are inconsistent or contrary to positions mentioned in this Newsletter, without notice.