10 Big Ideas for 2016; Australia Becomes Asian Nation

In The AFR today I present 10 big ideas for 2016, which include why: Australia will inexorably become an ethnically Asian nation; the major banks will go from trading at circa 2 times book value to 1 times as returns on equity converge to their cost of capital of 11%; the next big banking deal will be the CEO that tries to ape Macquarie; house prices will not plummet, but grind higher (our 2013, 2014 and 2015 forecasts were all spot-on); the US and UK unemployment rates are heading towards an amazingly low 3%, which will melt bond prices as risk-free rates rise; the jump in secular risk-free rates will pose real headwinds for global equities; it therefore makes sense to sell equity beta and buy alpha, as we advised last year; major bank subordinated debt is globally very cheap and our pick of "spread" assets that can offer attractive returns above inflation and deposits; and why gold could be a good bet in the medium term as inflation pressures build. Link (VIEW LINK)