Daily roundup of research and analysis from The Globe and Mail’s market strategist Scott Barlow
RBC Capital Markets analyst Pammi Bir released his top picks in the REIT sector,
“Our Outperform ratings are unchanged and include Allied, Boardwalk, BSR, CAPREIT, Dream Industrial, European Residential, First Capital, Granite, InterRent, Killam Apartment, Minto Apartment, Morguard Residential, RioCan, SmartCentres, Chartwell, FirstService, and StorageVault. Q1 results were largely in line, with a notable acceleration of organic growth. Our forecasts continue to reflect healthy earnings and NAV growth for the year ahead. Nonetheless, investor sentiment seems to be struggling to gain traction amid an anticipated pullback in economic activity, higher rates, and nervousness surrounding the availability of credit, particularly for property types facing fundamental pressures. With this in mind, our picks remain largely anchored in subsectors we expect to exhibit stronger operational resilience, particularly multi-family, industrial, self-storage, and defensive retail.”
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BMO economists Doug Porter and Robert Kavcic discussed the housing affordability problem with Catch-’23: Canada’s Affordability Conundrum,
“While most will argue for a supply side fix, our longstanding view has been that it’s wishful thinking to believe that an industry, already running at full capacity, can simply double output in short order, flood the market with new units and bring prices and rents down… a lack of new listings is the bigger factor tightening the market. National new listings were running at the lowest non-pandemic level in almost 20 years, despite a population that is now larger by 25 per cent, or by 8 million. Past real estate downturns that evolved from an asset price correction into something much worse have come at the hands of forced selling … the structure of Canada’s mortgage market has blunted the impact of higher interest rates with many variable-rate holders seeing amortizations stretch out … As prices level off, that leaves the national benchmark price correction at 16 per cent peak-to-trough. That has simply scrubbed the extreme froth out of the market, but hasn’t gone far enough to actually make housing close to ‘affordable’ again … When mortgage rates jump from 1.5 per cent to 5 per cent, maintaining affordability would require a 25-per-cent cut in the price of the house … affordability over time, accounting for incomes, mortgage rates and house price changes, and the takeaway is that the pandemic-era deterioration has scarcely been touched … The investor class is increasingly dominating the Canadian housing market. A recent StatCan study of five provinces (including Ontario and B.C.) finds that over 25 per cent of dwellings are owned by investors as of 2020 … Beyond that, Canada’s strong population growth is no doubt a steady source of support for home price appreciation”
This is a case where it’s probably best to read the entire essay, there are too many important details to excerpt them all.
“Catch’23: Canada’s Affordability Conundrum” - BMO Economics
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The Financial Times posted a feature on how Nvidia became the go-to provider of artificial intelligence-related semiconductors,
“In 2022, US chipmaker Nvidia released the H100, one of the most powerful processors it had ever built — and one of its most expensive, costing about $40,000 each. The launch seemed badly timed, just as businesses sought to cut spending amid rampant inflation. Then in November, ChatGPT was launched… ChatGPT’s sudden popularity has triggered an arms race among the world’s leading tech companies and start-ups that are rushing to obtain the H100, which Huang describes as “the world’s first computer [chip] designed for generative AI” … [management’s] confidence on continued gains stems in part from being able to work with chip manufacturer TSMC to scale up H100 production … ‘This is among the most scarce engineering resources on the planet,’ said Brannin McBee, chief strategy officer and founder of CoreWeave, an AI-focused cloud infrastructure start-up.”
“How Nvidia created the chip powering the generative AI boom” – Financial Times (paywall)
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Diversion: " NASA’s Mega Moon Rocket Is $6 Billion Over Budget, Claims Scathing New Report” – Gizmodo
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