Daily roundup of research and analysis from the Globe and Mail’s market strategist Scott Barlow
I don’t think BMO economist Robert Kavcic would disagree that some major Canadian centres need more housing supply, but his point here - that housing listings are running well above year ago levels and partially addressing the supply issue - is important.
“Contrary to the perception out there, new residential listings in Canada rose to a record high in March. The market is indeed drum tight. But, look at the chart and decide what looks more out of balance? The denominator (supply being too low)? Or the numerator (sales being too high)? Hint: It’s the latter (i.e., the red line surging off the page). In fact, on a seasonally adjusted basis, new listings are now running 25% above pre-COVID norms (we use all of 2019 here as the baseline). Sales, however, are running almost 75% above that level. We’ll reiterate that this acute surge in demand is exaggerated by massive federal-to-household transfers, the promise of low-for-long interest rates, engrained expectations of price growth, fear of missing out, and likely some speculation.”
“@SBarlow_ROB BMO: High demand, not low supply, is the current problem for Canadian housing market” – (research excerpt, chart) Twitter
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Scotiabank strategist Hugo Ste-Marie highlighted forecasts for the best TSX quarterly earnings season since 2003,
“Profits should be up 94% YoY from the Q1/20 trough (highest pace since 2003). Healthy consumer balance sheets, a pickup in discretionary spending, and better-than-expected commodity prices should more than offset negative seasonality, in our view, potentially leading to above-average positive surprises for the fourth consecutive quarter in a row… Sales per share may contract 4.9% from Q4/20. Nevertheless, sales forecasts remain upbeat for the remainder of 2021… Financials, Energy, and Discretionary are set to beat, while Industrials could disappoint for a second quarter. Strong results from U.S. banks are an auspicious sign for their Canadian counterparts. In our view, a robust housing market, a hot streak of M&A activity and potential reversals in PCL (provision for credit losses) charges increase the odds of a beat in the sector… Looking forward, TSX EPS is expected to hit a new all-time high this year (C$1,124), exceeding the 2019 high of C$1,063.”
“@SBarlow_ROB BNS: Best quarterly earnings season since 2003 ahead for TSX” – (research excerpt) Twitter
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Citi analyst Aakash Doshi detailed a big problem with cryptocurrencies – they are extremely un-environmentally friendly. Politically, this makes it easier for regulators to start intervening in crypto markets.
“The power load for Bitcoin has surged ~66x since late 2015, surpassing that of the entire nation of Argentina, with ~ 60% higher carbon intensity, as over 60% of mining activity appears based in China, where 60% of power comes from coal. As of mid-April 2021, global power demand by the Bitcoin network likely hit an annualized 143-TWh, ~4% higher than Argentina’s total electricity generation in 2019, according to Cambridge University Center for Alternative Finance. Yet CO2 emissions from the Bitcoin network could well be 60% higher than Argentina’s electricity sector in 2019, as over half of Bitcoin’s electricity demand is met with coal. A year ago, China hosted ~65% of global Bitcoin hashrate, but that number could be lower now as digital mining activity is shifting away from China, primarily to the US, Russia, Kazakhstan, Iran, and Malaysia. Back in late 2019, over 75% of Bitcoin hashrate was located in China, and the US was third. The US now ranks second in the hashrate ranking, as it overtook Russia in 1Q’20, with over 7% share by April 2020”
" @SBarlow_ROB Citi: ‘As of mid-April 2021, global power demand by the Bitcoin network likely hit an annualized 143-TWh, ~4% higher than Argentina’s total electricity generation in 2019″’ – (research excerpt) Twitter
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Diversion: “This Beatles album could become the most expensive record ever sold” – A Journal of Musical Things
Tweet of the day: “@SoberLook China’s investment-grade bond yields are climbing. Investors worry that Beijing may allow some SOEs to fail. Source: @WSJmarkets " – Twitter
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Scott Barlow