Hi, Jamii Finance Readers!
If you’re anything like me, you must be glad to know you can mute certain words to stop them from appearing on your Twitter feed this week. Top contenders include: “valentine’s”, “you are sitting at home”, “lonely”.
I hope that the 45 days of January coming to an end have brought you relief! Our focus this month is to get you excited about, you guessed it - investments. While we target this newsletter at East African residents, we are eager to share some conversations which make it to the global financial stage. GameStop? Bitcoin? Crypto? It is understandable to not take a keen interest in these events especially since we’re literally and figuratively so far removed from that context. America is only about 14,000km away and platforms like Robinhood still do not offer their services to East Africans. Yet, the US government pumping trillions of dollars into the US economy does affect the value of the dollar worldwide - it decreases its value.
This month’s newsletter will provide historical context on Bitcoin, a cryptocurrency slated to disrupt the centralized financial system. The podcast linked also mentions the rationale for investing in BTC as a hedge against inflation which is what’s anticipated to happen with the dollar - currently used as a global reserve currency. As a bonus, our resident finance guru is providing a brief summary of the GameStop mania which happened last month:
It all started late last month when suddenly, people couldn’t stop talking about GameStop, a video game retailer whose stock price was popping far beyond what most people thought it was worth.(The stock went from below $20 in the first days of 2021 to an all-time-high of $348 by January 27th. Had you invested $1,000 on January 1st you would’ve had ~$19,000 in your account on the 27th of the same month!)
So how did all this start? Well, Gamestop wasn’t doing very well as a company. In fact, many “experts” believed it was going to fail. Therefore, Like many companies that are in a rough shape, GameStop was the subject of what's called short-selling, in which professional investors borrow shares of a stock to sell and then buy back later so they can return them, which lets them pocket the profit if the stock price goes down. They are basically bets that the company will fail.
It so happened that GameStop was one of the most shorted of all publicly traded companies.
And then internet warriors took the matter in their own hands and orchestrated a “short-squeeze”.
Remember short-sellers borrow a stock and sell it betting that it will go down and buy it back at a lower price and return it to the lender? What happens then if the stock goes up? Short-sellers have to buy it back at a higher price; this, friends, results in what they call a “short-squeeze”. And this is exactly what happened with Gamestop. Users of the social media, Reddit, decided that Wall Street was making a mistake short-selling GameStop and they decided they should all buy it and “HODL” it, you know, diamond hands. In any case, they bought so much of it and pushed the price up so high that professionals lost billions and billions of dollars. S3 Partners, a financial data company, said that its analysis found that short sellers lost $23.6 billion on GameStop last month.
Even in Global Finance, the internet remains undefeated!
If any of this is flying over your head, you will be pleased to know that you’re not alone. Constant exposure and reading about these topics definitely makes it easier to understand!
And now to the fun stuff:
Resource of the Month:
Great historical background and rationale of Bitcoin! I recommend listening at x1.5 speed as it is lengthy but definitely worth your time! Also, Coinbase let’s you invest in crypto even if you’re not in the US. IYKYK.
ICYMI:
We’ve joined the cool kids and are now hosting clubhouse chats. We discussed our favorite topic, money, last week. A link to the resources can be found here. Keep an eye out for our twitter page for information about the next CH hangout.
The Bridge2Rwanda Fellowship application officially opened this week! Encourage some great high school students to apply for a chance to pursue college degrees abroad.
If you’re still working from home, The White Tiger is a wonderful movie to watch with friends and family (or your S/O, which we are jealous about!); Great social commentary on class dynamics and the acting is nothing short of superb!
I took a break while drafting this newsletter to chuckle at the hilarious roast fest of Weetabix.
The Jamii Finance Team is looking to interview entrepreneurs in any field to be featured in this newsletter. If you know anyone interested in sharing their journey with us, please reach out to contactjamii@gmail.com. Thank you and have a fruitful week!