I’ve attended NoteExpo 2018 and the recent Note Camp, and I’ve walked away with a colossal list of vendors for things I apparently need but didn’t realize I need. However, what I still don’t have is knowledge of the basic nuts and bolts of notes investing; although, Note Camp did a really good job of hosting some sessions where they walked through some basics in detail. So Scott Carson did a good job there.

Nonetheless, how do I even price a note? Let’s start there! How do I even figure out the fair market value of the damn thing??

Lots of “abnormal returns” case studies are thrown out, numbers are spouted off at lightning speed, and people are told, “It’s that easy.” Okay. Then why can’t anyone stop to talk about something as basic and supposedly “easy” as simple pricing? Let’s walk through that first before you tell me how easy I’ll apparently become a gazillionaire.

This seems like a basic thing, and I can’t find a good source for some of this. And no, I’m not paying someone thousands of dollars to show me how to present value a future cash flow expectation. I can do that all day long myself, and when I do, none of the note prices I’m seeing come remotely close to making sense. That’s what I’m missing, and it’s what I get the feeling a lot of others are missing too.

For example, I brought up Fed rate increases to one guy and asked how they’d affect the fair market value of notes, and he said, “It won’t really; that’s not how the notes market works.” Uh what? Since when are debt instruments traded in a secondary OTC market not rate sensitive? So you’re telling me duration and convexity don’t apply to fixed income instruments anymore? lolwut

THAT’s the sort of thing I’m talking about. Some of these supposedly simple things are not making sense.

Is there a basic guide out there that explains some of this at a low level? I’m not opposed to buying a well written technical book or article, but I’m not doing the whole, “Give me $2,000 and we’ll talk basics” thing.

My impression of the notes market so far is there is limited market transparency with zero to limited price discovery. Basically, people are making up what they want it to be, and a few have gotten lucky doing that. Maybe that’s accruate and maybe it’s not.

Any recommendations from the smart people on here on where to go to bridge these knowledge gaps? I’m looking for solid technical references, as I’ve not been able to find myself (so I’m clearly not looking in the right places).

Any help would be appreciated.