Why Short Squeeze was probably born in Africa
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If you know Nairobi, Lagos, or Accra streets well, you have probably seen this movie before. The hammers in the back room of a hardware store are held for a customer. But for a small fee, a friendly employee lets you “borrow” one harmer. You sell the harmer for 100 each on Main Street to a ready customer. You manage to buy a harmer from a different place for 70 each and return it to the friendly employee before the big boss does inventory. By selling high and buying low, you just made 30. You are a genius hustler!
You do this several times because, well, you are a genius. One day you sell 20 hammers for 100 each but, suddenly the price of the hammer jumps up to 150 apiece. You are unable to find low-price hammers to replace the ones you “borrowed”. Oh, God! The friendly employee wants his hammers back immediately!
Now you and your fellow hustlers are running to buy harmers before they get pricier. The scramble to buy the hammers only adds to the upward pressure on the hammers’ price. There is a guy at the corner now selling hammers for 1000 apiece. The excitement drives the hype even further. You are short of breath and your head feels squeezed. Your friend at the store wants the 20 hammers back or his goose is cooked!
In Wall Street, short-sellers borrow stocks that they believe will drop in price in order to buy them after they fall. They later return the shares (and pocket the difference). What if they are wrong (or social media happens) and the price goes up? They must buy at a higher price. The broker wants his shares back.
The scramble by short-sellers trying to cover their positions by purchasing large volumes of stocks (Short squeeze) causes a further rise in the price. It becomes a roller-coaster. That excitement drives the hype even further. How do you stop this madness? You don’t. The broker still wants his shares back or his jig is up. The stocks belong to a retirement fund in the backroom.
Did you just find out that you are already an expert in short selling in a weird way?
Shocking data: The 2 million Africans living in USA May Never Retire
https://mhgcode.com/shocking-data-the-2-million-africans-living-is-usa-may-never-retire/.
Mahugu Nuthu is a content creator known for his compelling and well-researched business analysis. His blog MHGcode.com provides insights and proven strategies for effective entrepreneurship, side hustle hunting, passive income pursuit, small business ideas, saving, and tips on slashing costs.
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