5 Things I Did While Searching for a Job in a Recession

Searching for a job in the biggest recession since the Great Depression of 1930's was no mean task.  I did everything possible to get a job after I voluntarily resigned from my very stable job in the Banking industry.  Some people called me a fool, but that was the best thing I ever did.

This was in September 2008.  After that I travelled in India for four months, the highlight being my visit to Baba Amte's Hemalkasa project and a trek to the foot of Mt. Kanchendzonga - world's third highest peak.

I returned from India in late January 2009 and quickly discovered that we were indeed in a recession!  The job market had completely dried up.  There were hiring freezes everywhere.  Even some of my best leads fizzled.  The head-hunters who used to drive me crazy with frequent phone calls and e-mails with job leads were suddenly quiet.  The world was in a deep sleep ... recession.

Interestingly, I did manage to land a couple of interviews in February, however, due to a hiring freeze, one of those interviews led to nothing, and the other one I didn't get the job as I was ill-prepared for it.  I cannot stress the importance of preparing for interviews, as I blew several interviews because of my over-confidence and lack of preparation.

So what did I do?  Aside from networking with people in the industry, I spent a lot of quality time with my niece and newly born nephew.  I also watched a lot of movies.

In April, I started thinking of more travelling.  It didn't take me very long to draw up an adventurous itinerary to Southeast Asia, which included Thailand, Myanmar (Burma), Laos and Vietnam.  And I was off again - on my own - and returned in July from an eye-opening journey.  The latest trip only fueled my wander lust.  I learned that to travel is to discover everyone is wrong about other countries.  The world's such a beautiful and amazing place.

South America and Africa are next on my list.  I will visit these places while on a World Tour that I have planned in the future...  I love going to new places and experiencing new and different cultures, and meeting people from all walks of life.  But you already knew that, right?

After returing from Southeast Asia, I had to get serious about finding a job.  I did a number of things when searching for a job.  The things that gave me the most positive results will not surprise anyone.

Here are all the things that I did when searching for a job:

    1. Post your resume on job posting sites.

• 13% of the interviews that I was called for were due to posting my resume online.

• Recruiters/head-hunters often scour resumes posted here and contact people with job leads.  I got several interviews this way.
  
  
• Most jobs posted here are with agencies.  I mostly didn't apply to these jobs and limited myself to "actual" job postings from companies.

    2. Work with recruiters/head-hunters.

• 19% of the interviews that I was called for were thanks to head-hunters.

• I worked with a lot of head-hunters and discovered that some have very good contacts in the industry who can quickly get you an interview, and others who are "all talk".
  
  
• It is to your advantage to work with head-hunters as they are quite resourceful and have many contacts.
  
  
• I had several interviews via head-hunters.

    3. Network with people.

• 44% of the interviews that I was called for were due to networking with people.

• I kept in touch with all my colleagues from my previous job.  Everyone who should know I was in the job market, knew I was in the market!
  
  
• I often met people over a cup of coffee or lunch.  The intent was not just to get a job, but to keep in touch.
  
  
• Your ex-colleagues and friends can help you in a number of ways.  For example, I had an interview in February(!) because someone had recommended my name to a head-hunter who had good contacts in the industry.
  
  
• Last month I received a call from one of my high-ranking contacts who literally offered me a job over the phone - however, I had already found something by that time.
  

    4. Visit a company's "Careers" page and apply online.

• 25% of the interviews that I was called for were due to applying for jobs independently via a company's corporate website.
  

• Since it was not ideal to totally depend on head-hunters to get me interviews, I made a list of all the companies I was interested in working in and visited their corporate website and applied for jobs independently via their Careers page.
  
  
• I expected nothing by applying for jobs in this way as the HR department probably receives thousands of resumes this way and mine would be just "another one".
  
  
• Interestingly though, I ultimately found an "unadvertised" job this way!  My resume was forwarded by HR to a hiring manager who called me for an interview.  The company was looking for an independent contractor to work on a large Risk Management project - and I was the chosen one.  So, a legal contract was signed, and I'm now three months into it.  The position was totally unrelated to the job that I had originally applied for online.  I think I just got lucky.

    5. Create a LinkedIn profile.

• I had no luck getting any interviews this way.

• A head-hunter recommended me to do this.
  
  
• Apparently, a lot of recruiters these days are finding candidates this way.
  

In conclusion, I think it is true that the best jobs are not advertised!

Equity Markets: Good News & Bad News

I think the recession is coming to an end. Most global stock indices have rallied over 20% since bottoming out in early March. Stock markets are leading indicators of the economy and they rally well before we get confirmation that the recession is indeed over. Similarly, the markets had started dropping well before we knew we were in a recession.

Among the BRIC (Brazil, Russia, India and China) nations, the Indian markets are the best performers with India's BSE Sensex Index clocking over a 40% gain since the early March low! Many of the blue chip stocks such as ICICI Bank and Tata Motors have more than doubled. I'm very pleased to have made some very significant investments in Indian equities when the markets were dropping like a rock.

The good news is that the recession is coming to an end; the bad news is that the market has already bottomed (in early March). So, all those investors who had been waiting for the market to bottom to start purchasing stocks - the market has already bottomed.

Having said that, I don't think it is too late to make long-term investments. Since the market has had a good rally, I wouldn't be surprised to see a small correction soon, and that, I think, will be a prudent time to make long-term investments by all those who had been waiting for the market to bottom.

If an investor keeps in mind that it is impossible to buy at the absolute bottom and sell at the absolute top, then I think (s)he will do well in the long-term. This is my Golden Rule, which I try to follow.

Please take the poll on the left-hand side of this page and vote 'yes' if you think the market has already bottomed, and 'no' otherwise.

Made In America: The "Credit Crunch"

A lot has been said about the volatility of stock markets due to the "sub-prime" mortgage woes in America and the so-called "credit crunch". This has been going on for almost a year now. This is a 100% 'Made in America' problem that is affecting everyone worldwide - finally something that is not 'Made in China'!

It took me a while to understand how the sub-prime loans and the credit crunch were related and how they were affecting the economy. I'm sure there are many who still do not understand what the credit crunch is all about. Let me try to explain:

- Banks have a "prime" rate, which is the lowest or best interest rate that is offered to people with a perfect credit rating.

- People with a less-than-perfect credit rating have to pay a premium on top of the prime interest rate.

- The premium is to compensate the lender for taking on the additional risk of loaning money to someone who may not be able to pay it back.

- Generally speaking, banks do not lend money to people with poor credit ratings.

- However, in the U.S., amidst the booming real estate market, many mortgages were sanctioned to Americans with poor credit ratings, on some seemingly good terms.

- Under the terms, the lenders charged a special interest rate which was below the prime rate (i.e. "sub-prime"), for the first three years.

- The catch was that after three years, the rate would reset to a rate significantly higher than the prime rate.

- The lenders, in the mean time, would immediately "sell" the mortgages, which are their assets (loan receivables), to investment companies.

- The investment companies, would "re-package" the mortgages into what are called "CDOs" or Collateralized Debt Obligations, which are in turn sold to investors all over the world. The investors were mainly big banks, brokerages and hedge funds in the U.S. and Europe.

- CDOs are nothing more than different types of loan receivables - e.g. credit card receivables, mortgage receivables (including sub-prime) etc.

- Ratings companies, like S&P and Moody's, gave a higher rating to the CDO than any individual receivable in it.

- The reasoning was that if one of the loan defaults, it still wouldn't affect the CDOs ability to pay interest - due to diversification of loans.

- The problems began when after three years, the interest rates reset to higher rates. Americans found it difficult to make their (now higher) monthly mortgage payments and faced foreclosures.

- With foreclosures numbering in the hundreds of thousands every month, investors began to question the value of their investment: the CDO.

- Ratings' agencies cut the rating on some mortgage-backed securities (like CDOs) from investment grade to pure junk status in one calendar year!

- This triggered massive panic among investors and the market for CDOs quickly dried up. Many panic-stricken investors sold these at a fraction of what it cost them to buy.

- Not knowing the true value of the CDOs they held, many investors who did not sell were forced (due to mark-to-market regulation) to take massive write-downs on the value of these investments. The write-downs have so far totalled almost half a trillion dollars and analysts expect the total to reach $1 trillion before it is all over.

- Now, "credit crunch" is when lenders are unwilling to lend money ("credit") to businesses. This happened because the lenders (banks) had lost billions in the CDO market and some no longer had the cash even to stay afloat, let alone lend money to others. If banks don't lend money, they don't make any money.

- The banks are even afraid to lend to each other because they don't know what the other bank's exposure to CDOs is, and their ability to pay back.

- If businesses are unable to borrow money (to expand or to pay their own obligations), then they either cut-back on expansion plans or may even go into bankruptcy, thus resulting in recessionary conditions.

- If individuals are unable to borrow, then they may have to declare bankruptcy or hold-off on buying big-ticket items like houses, automobiles and appliances, again, leading to recessionary conditions.

Quite interesting the way capital markets work!

Bring in the Bears!

I'm getting excited about the capital markets these days. I look forward to oil prices hitting new records and the Dow Jones Industrial Average dropping triple-digit points. The valuations are becoming increasingly attractive - especially the non-US financial institutions.

All of this is possible thanks to some smart investment bankers and incompetent ratings' agencies (like Moody's), risk managers and portfolio managers.

Why the investment bankers? Because they were able to "package" various sub-prime mortgages into a new type of investment and then sell it (usually to banks) for a profit. The people at ratings' agencies played their part by giving these new investments an "investment-grade" rating. It is now clear that they did not understand what they were rating. They figured the packaged investment was sufficiently diversified. I guess they did not understand the terms of the mortgage (i.e. low "teaser rates") nor the borrowers.

As the US homeowners started to default on their payments, the banks who bought these investments now have no idea what their investments are really worth - hence the write-downs. What were the people at "Risk Management" doing while these investments were being bought in the billions? Sleeping, of course! And last, but not least, the portfolio managers. How could they break one of the golden rules of investing - not to buy things you do not understand?

If this continues for a while more, I will be making some substantial long-term investments. I look forward to doing that.

Keep it up and bring in the bears (and sheep)!