Canadians are still real estate fanatics, but the peak was so high, today’s levels seem normal. Statistics Canada (Stat Can) data shows investment in residential structures increased in Q3. When compared as a percentage of GDP however, residential investment is down from the peak. Although it’s still way above usual.
Residential investment (a.k.a. residential structures in Canada) is real estate’s direct contribution to GDP. It includes construction, renovation, and ownership transfers – but not a comprehensive measure. For example, the renovation part only covers large renovations such as roofs and kitchens. It excludes routine maintenance and superficial upgrades like painting. The segment measures a good portion of real estate, but not quite all. For example, insurance and finance are largely dependent on real estate, but not included here.
Canadian Residential Investment Reached Over $46 Billion In Q3
In current dollar terms, the amount dedicated towards residential investment is growing. Residential investment reached $46.04 billion in the quarter of Q3 2019, up 4.29% from the previous quarter. This works out to an increase of 3.45%, when compared to the same quarter last year. The increase is higher than last year, but the gains are small in contrast to recent years.
Canadian Residential Investment
The amount spent on residential stuctures in Canada.
Source: Stat Can, Better Dwelling.
The year-over-year (YOY) growth is big for a quarter over the past 12 months, but still unusually low. This is the biggest YOY for any quarter since Q4 2017, with most of the recent numbers printing negatives. Even so, this is the second slowest YOY growth for Q3, in the past years. Other than last year, this is slow for the industry.
Residential Investment Is Over 7% of GDP Still
Residential investment as a percentage of GDP is falling, but still elevated. It represented 7.68% of GDP in the quarter of Q3 2019, down from 7.79% from a quarter before. Compared to Q3 last year, it’s a little higher – but some of this appears to be distribution. That is, some quarters in the past year have been slower than usual, and some faster. This becomes apparent when we look at growth over a longer period.
Residential Investment As A Percent of GDP
The amount of Canadian residential investment, expressed as a percent of GDP.
Source: Stat Can, Better Dwelling.
The rolling 12-month trend shows just how dependent Canada has become on real estate. Residential investment as a percentage of GDP is coming down on an annual basis. It most definitely peaked in 2017. We’re still very much above historic norms though. In fact, cheap financing and financial innovations prior to the Great Recession couldn’t even compete with this percent of the economy devoted to real estate.
Canada’s dependence on real estate as a driver for the economy is lower, but higher than it should be. For context, residential investment in the US is below 4 percent today. The US hasn’t breached 7% in over 50 years – even right before the great recession. Canada on the other hand, has been over 7% for almost half a decade now.
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GameStop falls 27% on potential share sale
Shares of GameStop Corp lost more than a quarter of their value on Thursday and other so-called meme stocks also declined in a sell-off that hit a broad range of names favored by retail investors.
The video game retailer’s shares closed down 27.16% at $220.39, their biggest one-day percentage loss in 11 weeks. The drop came a day after GameStop said in a quarterly report that it may sell up to 5 million new shares, sparking concerns of potential dilution for existing shareholders.
“The threat of dilution from the five million-share sale is the dagger in the hearts of GameStop shareholders,” said Jake Dollarhide, chief executive officer of Longbow Asset Management. “The meme trade is not working today, so logic for at least one day has returned.”
Soaring rallies in the shares of GameStop and AMC Entertainment Holdings over the past month have helped reinvigorate the meme stock frenzy that began earlier this year and fueled big moves in a fresh crop of names popular with investors on forums such as Reddit’s WallStreetBets.
Many of those names traded lower on Thursday, with shares of Clover Health Investments Corp down 15.2%, burger chain Wendy’s falling 3.1% and prison operator Geo Group Inc, one of the more recently minted meme stocks, down nearly 20% after surging more than 38% on Wednesday. AMC shares were off more than 13%.
Worries that other companies could leverage recent stock price gains by announcing share sales may be rippling out to the broader meme stock universe, said Jack Ablin, chief investment officer at Cresset Capital.
AMC last week took advantage of a 400% surge in its share price since mid-May to announce a pair of stock offerings.
“It appears that other companies, like GameStop, are hoping to follow AMC’s lead by issuing shares and otherwise profit from the meme stocks run-up,” Ablin said. “Investors are taking a dim view of that strategy.”
Wedbush Securities on Thursday raised its price target on GameStop to $50, from $39. GameStop will likely sell all 5 million new shares but that amount only represents a “modest” dilution of 7%, Wedbush analysts wrote.
GameStop on Wednesday reported stronger-than-expected earnings, and named the former head of Amazon.com Inc’s Australian business as its chief executive officer.
GameStop’s shares rallied more than 1,600% in January when a surge of buying forced bearish investors to unwind their bets in a phenomenon known as a short squeeze.
The company on Wednesday said the U.S. Securities and Exchange Commission had requested documents and information related to an investigation into that trading.
In the past two weeks, the so-called “meme stocks” have received $1.27 billion of retail inflows, Vanda Research said on Wednesday, matching their January peak.
(Reporting by Aaron Saldanha and Sagarika Jaisinghani in Bengaluru and Sinead Carew in New York; Additional reporting by Ira Iosebashvili; Editing by Sriraj Kalluvila, Shounak Dasgupta, Jonathan Oatis and Nick Zieminski)
U.S. to work with allies to secure electric vehicle metals
The United States must work with allies to secure the minerals needed for electric vehicle batteries and process them domestically in light of environmental and other competing interests, the White House said on Tuesday.
The strategy, first reported by Reuters in late May, will include new funding to expand international investments in electric vehicles (EV) metal projects through the U.S. Development Finance Corporation, as well as new efforts to boost supply from recycling batteries.
The U.S. has been working to secure minerals from allied countries, including Canada and Finland. The 250-page report outlining policy recommendations mentioned large lithium supplies in Chile and Australia, the world’s two largest producers of the white battery metal.
President Joe Biden‘s administration will also launch a working group to identify where minerals used in EV batteries and other technologies can be produced and processed domestically.
Securing enough copper, lithium and other raw materials to make EV batteries is a major obstacle to Biden’s aggressive EV adoption plans, with domestic mines facing extensive regulatory hurdles and environmental opposition.
The White House acknowledged China’s role as the world’s largest processor of EV metals and said it would expand efforts to lessen that dependency.
“The United States cannot and does not need to mine and process all critical battery inputs at home. It can and should work with allies and partners to expand global production and to ensure secure global supplies,” it said in the report.
The White House also said the Department of the Interior and others agencies will work to identify gaps in mine permitting laws to ensure any new production “meets strong standards” in terms of both the environment and community input.
The report noted Native American opposition to Lithium Americas Corp’s Thacker Pass lithium project in Nevada, as well as plans by automaker Tesla Inc to produce its own lithium.
The steps come after Biden, who has made fighting climate change and competing with China centerpieces of his agenda, ordered a 100-day review of gaps in supply chains in key areas, including EVs.
Democrats are pushing aggressive climate goals to have a majority of U.S.-manufactured cars be electric by 2030 and every car on the road to be electric by 2040.
As part of the recommendations from four executive branch agencies, Biden is being advised to take steps to restore the country’s strategic mineral stockpile and expand funding to map the mineral resources available domestically.
Some of those steps would require the support of Congress, where Biden’s fellow Democrats have only slim majorities.
The Energy Department already has $17 billion in authority through its Advanced Technology Vehicles Manufacturing Loan program to fund some investments.
The program’s administrators will focus on financing battery manufacturers and companies that refine, recycle and process critical minerals, the White House said.
(Reporting by Trevor Hunnicutt in Washington and Ernest Scheyder in Houston; Editing by Mary Milliken, Aurora Ellis and Sonya Hepinstall)
Mining rig maker Canaan argues against wholesale crackdown on bitcoin mining in China
A major Chinese maker of bitcoin mining machines argued against an indiscriminate crackdown on cryptocurrency mining in China, saying the business helps make better use of electricity and contributes to employment and the local economy.
Zhang Nangeng, CEO of Nasdaq-listed Canaan Inc, told an earnings conference call that although cryptomining activities using fossil-fuel power hampers Beijing’s green efforts, those powered by clean energy should be spared from the crackdown.
“For-profit miners prefer regions with low electricity prices that indicate oversupply, and likely energy waste,” Zhang said.
In addition, “bitcoin miners also help create jobs in impoverished regions and contribute to fiscal coffers.”
Zhang’s comments come after China’s State Council, last month, ordered a crackdown on energy intensive bitcoin mining and trading, and Inner Mongolia, a major mining centre, proposed measures to root out the practice.
Energy regulators in southwest Sichuan – a province rich in hydropower – met local power generators on Wednesday to probe cryptomining in China’s second-biggest bitcoin production hub.
Bitcoin and other cryptocurrencies are created or “mined” by high-powered computers competing to solve complex mathematical puzzles in an energy-intensive process that often relies on fossil fuels, particularly coal.
Canaan makes machines, or rigs, to mine bitcoins.
Zhang said policy uncertainty is prodding domestic miners to move overseas, and causing some clients to hold off placing new orders for mining equipment.
Beijing’s crackdown is also prompting some miners to “undersell” mining equipment, helping knock-down prices, Zhang said.
Spot prices of bitcoin mining machines are down 20%-30% from roughly a month ago, hurt by falling bitcoin prices.
To reduce business uncertainty, Canaan is accelerating overseas expansion, securing long-term contracts, and setting up its own offshore bitcoin mining business.
Canaan, which on Tuesday reported a nearly 500% surge in first-quarter sales to 402.8 million yuan ($63.12 million), said overseas markets now contributes to 78.4% of its total revenues. That compares with just 4.9% in the first quarter of 2020.
Orders from overseas clients, including Canada‘s Hive Blockchain Technologies, and U.S. crypto player Core Scientific, also account for more than 70% of total orders.
Canaan is also expanding into bitcoin mining itself, having set up an office in Singapore, and is preparing to launch a cryptomining business in Kazakhstan, in central Asia.
“Just as it took a long time for bitcoin to be recognized by the market, there will also be a (long) process for bitcoin, and cryptomining, to be recognized by regulators” in China, Zhang said.
($1 = 6.3820 Chinese yuan renminbi)
(Reporting by Samuel Shen and Alun John; Editing by Shri Navaratnam)