No. of Recommendations: 2
I was putting in screen time this morning, scanning for bond opportunities, and an offering Tenet's 9 7/8's of '14 caught my eye. The offer at E*Trade was 95.75, and they generally (always?) mark up bonds. So I priced them through IB, who quotes the inside market. But what I saw was that E*Trade's offer was under what was supposed to be the best offer. Immediately, I suspected that something was going on. So I pulled the news for the company. [Ticker: THC] Sure enough, there was a wire release dated July 24 with a headline of: “US CREDIT-HCA leads to speculation on hospital bonds”. I have no idea whether the situation represents an opportunity. That can only be discovered by doing one's due diligence. But the situation offers a lesson. When something seems out of the ordinary, it might be worth investigating.

So, I pulled all of E*Trade's offers on Tenet's bonds and encountered another surprise. Three of the five offers were being made in round numbers and the other two, though they were expressed as two-place decimals, really were meant to be understood as fractions. That's highly unusual. Bonds are normally priced with the decimal carried out to three places. Something is going on. Also, E*Trade was also pricing the 6 7/8 of '31 below the national between offer. So I guessed it was putting out low offers on all of Tenet's bonds which suggests that somebody is dumping. I have no idea why, or even that such is the case. But pricing anomalies are happening that might turn up an opportunity once the necessary legwork is done.

Caveat emptor!

Charlie
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