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The State of the World Economy in One Chart

The complexity of global economies and the financial market can make it difficult to simply understand what’s going on, let alone make investment decisions based on the prevailing conditions.

Not today, though.

Just like every Friday in the Wall Street Daily Nation, we’re letting some carefully selected charts do the talking for us.

This go-round, we’re looking at a certain asset class, the internet and the global economy.

So let’s get to it…

Bond Rout? We Ain’t Seen Nothing Yet

The “Great Rotation” out of bonds and into stocks is well underway. Heck, even the Bond King, PIMCO’s Bill Gross, knows it.

In the last four months, investors yanked $41 billion out of his flagship fund, the PIMCO Total Return Fund (PTTRX).

Think that’s bad? Think again. The bond rout isn’t even close to being finished.

Despite a whopping $140 billion in bond outflows since May, based on a percentage of assets under management, we’ve only suffered a 2.9% withdrawal.

“This compares to 14% in 1994-1995, 8% in 1999-2000 and 5% in 2003-2004,” says Binky Chadha, Chief Strategist at Deutsche Bank (DB).

In other words, we ain’t seen nothing yet!

What Bonds Should We Own Right Now?

So are any bonds performing well? Well, I told you before that convertible bonds perform best in rising interest rate environments, since they represent a hybrid security with both bond and equity characteristics.

Sure enough, they’re up almost 17% year-to-date.

What’s the Next Big Internet Revolution?

High-speed internet access transformed the internet. Want proof? Ask AOL, Inc. (AOL) and Netflix, Inc. (NFLX). The development of the technology killed AOL’s business – and gave Netflix a serious boost.

As technology writer, Dan Frommer, points out, Netflix now has more customers than AOL ever did.

So the question now becomes: What’s going to be the next big internet revolution? Or as Frommer (bluntly) puts it, “What will eventually cause Netflix’s decline?”

Rest assured, it’s coming… And, of course, I’m doing my best to identify the specific disruptive technology early for you. So stay tuned.

The Most Surprising Economic Development… Ever?

I alerted you to this surprising trend a few weeks ago.

Basically, economies in developed nations are starting to accelerate, while economies in emerging markets are heading in the opposite direction.

This chart puts it all in perspective:

So much for emerging markets being a “sure-thing” investment, huh?

Of course, if you’re in the mood to make a contrarian bet on emerging markets – one with absolutely zero downside risk – you should check out the latest issue of WSD Insider.

That’s it for this week. Before you go, though, let us know what you think of this weekly column – or any of our recent work at Wall Street Daily – by going here.

Ahead of the tape,

Louis Basenese