February In Review: Sudden volatility followed by sudden volatility

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Oil at 3 figures for a barrel? Surely not? Oh....

February was a month in which one global political ideology which changed the value of almost every investible asset across the Western world gave way to another one which is rapidly doing exactly the same.

After a year of rarefied supplies of materials and commodities needed for daily industrial and personal life as a result of restrictions, suddenly that mantra has gone quiet and given way to a new one which is now occupying every page of every news channel in print, cyberspace or television; that being the war which has erupted between the Russian and Ukrainian governments.

The predictions by analysts last year that crude oil would zoom upwards in value to around $80 per barrel seemed outlandish at the time, but with supply chains down and travel bans in full swing within many recipient nations of the slippery black stuff, demand was higher than supply, hence the ever-appreciating value.

Suddenly we hear no more of this, and the mood of the moment is war, and whenever war occurs within an oil-producing nation, the prices go up. Here we are just a few weeks after mid-February when oil reached $99 per barrel.

Peer behind the panic on the news, however, and it remains clear that the real reason for such high values still remains; that being the oil cartel OPEC+ having cut production sharply in 2020 during the period when most lockdowns were imposed. Only recently have the OPEC+ nations moved to gradually restore output.

This is a very clever way for the oil industry to create a scarce market and capitalise on the supply vs demand differential.

Failing to restore oil production to its pre-2020 level can be viewed not only as a market-making tactic to drive the prices up, but also must be considered from an engineering perspective too.

Bringing the oil production levels back after scaling them back is not as simple as just flicking a switch. It is a very intensive engineering procedure and can take a long time to accomplish.

Congruently, many publicly traded oil companies have been under pressure from shareholders to deliver returns rather than invest more into scaling up production, therefore investors in oil company stock have been keeping a keen eye on corporate policy within those large oil giants.

Crypto market shrugs off Russian U-turn

Who would have thought it? The very same nation which is notorious for having an inflationary currency which the government uses to control and coerce its population and ensure that saving is futile, decided to seriously consider making cryptocurrency a legal and recognized form of currency.

That nation is Russia, and to much surprise, the government unanimously voted to allow cryptocurrency to be used as a mainstream method of payment within Russia, therefore giving hope to many people who have quietly suffered the loss of their capital many times over recent decades.

Short of capital controls, the ruble is a disempowering currency and many investors within Russia keep their capital outside the country, in Euros or Dollars.

It was, however, too good to be true as the country's finance ministry vetoed the idea and despite the government's proponency of legalising it on the grounds that it would move cryptocurrency 'out of the shadows' and give investors more protection and more versatility.

On February 22, the Russian finance ministry put a stop to any further discussion on the matter, having curtailed the central bank's approval of the plan to give Bitcoin legal tender status, citing the reason that cryptocurrency should be treated as an investment vehicle, and not as a form of legal tender or payment method, reinforcing the current policy in Russia that cryptocurrency is not permitted as a form of payment.

The news that the finance ministry wished to ban cryptocurrency as a form of payment and maintain the current status quo was far less surprising than any talk of Russia allowing cryptocurrency to be used as a payment method, therefore the prices of any cryptocurrency were unaffected.

Canadian dollar at 1-year low as Trudeau rails against his citizens

Last month's epic attempt by the Canadian citizens, led by professional truck drivers, to restore their liberties in the shadow of Prime Minister Justin Trudeau's heavy handed use of emergency powers to restrict the everyday lives and abilities to work of millions of Canadian citizens brought more than just a display of solidarity.

It brought a pessimistic approach by the markets toward the Canadian dollar, which by February 21 was at a one-year low against the British Pound.

Just a week before that, President Trudeau began to threaten the public by announcing that he would invoke emergency powers against them should they continue to protest, and the Canadian dollar fell further against major currencies in regions with fully open economies and no arbitrary restrictions.

By Friday, February 18, the Pound reached 1.73 against the Canadian dollar, representing its highest value in 1 year.

Even the Euro, which is the sovereign currency in a region which still has a few restrictions on its peoples' freedoms in place, gained considerably against the Canadian dollar and stood at 1.45 by February 21.

Investors are always wary of any form of national destabilisation by any government, especially if it is out of character as is the case in Canada.

Warren Buffett wades in and Microsoft stock hits low point

During the early part of February, tech stocks were very much on the backfoot, and the often-reliable major internet and technology firms of Silicon Valley, the darling of conservative investors, were dropping, bringing down the NASDAQ and S&P500 during the entire duration of February.

An event that did not help was Microsoft's sudden drop in value to $292.29 per share on February 15, which was a five-day low for the evergreen software manufacturer.

This came after a regulatory filing was aired on news channels showing that Warren Buffett's Berkshire Hathaway company had increased its ownership of Microsoft shares to 14.66 million, valued at $975 million at the end of 2021, a report that was made just two weeks after Microsoft announced that it intended to acquire gaming company Activision Blizzard, which caused Microsoft stock to rise substantially.

The intended acquisition is viewed internally as a step toward participating in 'Web 3.0' by Microsoft, a direction taken by many web and computer software and hardware manufacturers in which a virtual-reality space is created within which users can interact with a computer-generated environment and other users.

Looking at Warren Buffett's further acquisition of Microsoft shares, the regulatory filing had stated that by the end of 2021 it was worth $975 million, but as of February 15 this had risen in value to $1.2 billion. The question that shareholders and investors would look at is whether Warren Buffett is looking to become an activist investor in Microsoft and begin to shake its executive leadership team up.

Speculation... a cause of volatility.

Tesla the electric whale

For those who think that the front end of the Tesla Model 3 looks a little bit like a sea creature may find it of interest that Tesla itself has become a whale.

Whale is a term used within the cryptocurrency fraternity meaning a person or entity which holds a large value of cryptocurrency on a single wallet address, and Tesla is now considered to be a massive crypto whale to the extent that the company's market capitalisation is being bolstered by the amount of influence it has in the cryptocurrency market.

Whales often hold so much cryptocurrency that their buying and selling of digital assets can affect the value and move the markets.

In the case of Tesla, it was revealed in early February that by the end of 2021 the company held $1.99 billion worth of Bitcoin, having purchased a total of $1.5 billion of Bitcoin during the course of 2021.

Ordinarily, publicly reporting companies such as Tesla with a very high status in the global stock markets as one of the most traded stocks in the world would not engage in risky business such as large-scale Bitcoin investment, as shareholders with a conservative approach to risk may disapprove and a rapid downturn in Bitcoin values could have enough of an impact on Tesla's stock price to cause shareholders to take action for for the stock exchange on which its shares are listed to step in.

Remarkably, however, things have been very stable for Tesla. The announcement on February 8 that the company had been holding almost $2 billion in Bitcoin did not cause any negative sentiment among traders and stock rose after the announcement by over 1.6% despite the dive in value of Bitcoin later that day during the same US trading session hours.

Elon Musk created a 'market' last year as a result of his infamous tweet which wiped almost $1 trillion off the value of 5 major cryptocurrencies, only for them to rise again when he tweeted about the same subject a few weeks later.

Perhaps investors understand the power of influence. Either way, Tesla stands alone as a large-cap, publicly listed company on a major exchange which is a Bitcoin whale.

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