The markets had a disappointing week after a string of mostly uninterrupted positive ones. The Dow was down 2.12% for the week, the S&P down 1.79%, and the Nasdaq lost 2.29%. Spearheading the decline is the decision by the Chinese government to raise interest rates in response to fears of rising inflation. Also, we had a couple of high-profile companies, Cisco and Disney, with challenging earnings calls.

We see that Wall Street is now back into full gear, and financial wizards are up to their old tricks. For example, BWAY found buyers for PIK bonds- payment in kind. “Payment in kind” means that the bonds’ interest is paid by some means other than cash, usually by increasing the principal owed to the bondholder. Why someone would purchase such a bond is beyond us.

Another example is bonds being issued that are backed by assets that are already promised as security on another loan- like a second mortgage. The problem is, if the company becomes insolvent, the collateral can’t very well go to both bondholders.

Next week we have a very full week. The key components will be retail sales, housing and inflation. There are also numbers coming out on manufacturing and consumer confidence. The market will be focused on economic data next week.