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Financial Literacy

How to stay employable amidst massive unemployment

Here are some ways to stay employable amidst massive unemployment.

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With the advancement in technology and change in traditional job roles, the workspace is constantly changing. The recent Covid-19 crisis and its consequent economic downturn have rendered many people who were employed jobless, thereby increasing the rate of unemployment. Surviving in an ever-evolving and uncertain labour market, therefore, becomes a great deal of work which requires improved thinking pattern, continued professional development, life-long learning, and the ability to adapt.

Here are some ways to stay employable amidst massive unemployment:

1. Build your expertise

Companies and organizations are looking for individuals with ideas and knowledge that will shape the company’s growth. Learning more about your field will give you an edge over others. It will also enable you to discover new tools and strategies to adopt, that will keep you marketable and make you an attractive hire.

2. Be receptive to change and emerging innovations

Life-long learning is a habit that has to be encouraged if anyone hopes to stay employable. To remain relevant in the workforce, you need to build your competence beyond past qualifications and ideas. Receptiveness to change and emerging innovations will keep you abreast with what is in your career field.

3. Enhance your job-related skills

Landing a job is challenging. It is even more difficult during an economic downturn when companies are laying off workers. One of the strategies to stay marketable is to find ways to improve your job skills. Individuals can learn skills that align with current employability needs by taking up training and courses relevant to their career scope.

4. Be Savvy on Social Media Platforms

The recruitment sector is gradually gaining a presence on social media. Many recruitment agencies take to social media to look for and assess prospective candidates for some job opportunities. Building a strong social media profile and network will help to build relationships with peers and potential employers. This network will increase your chances of landing a job. Building a network in career fields of interest will keep you abreast of information and opportunities in your career path.

5. Refine your soft skills

As traditional work environments are replaced gradually by remote or virtual workspaces, companies are looking for individuals with soft skills like leadership, managerial competence, creativity, time management, good communication skills, etc. Individuals looking to stay employable have to develop soft skills that will help them remain economically viable. Many organizations do not just want to hire skilled people but also self-regulated and innovative individuals able to carry out tasks independently.

6. Be Confident 

Self-confidence will make you more assertive about your skills, knowledge, and abilities. Confident individuals can communicate their ideas more eloquently and convincingly. This personality will make them stand out and portray them as relevant hands needed in any organization.

Staying employable in today’s ever-changing and competitive work environment is a process of evaluation, learning, and adaptation.

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Financial Literacy

Is investing dead?

It appears the rules of investing have evolved from buy low to sell high, to buy high to sell higher.

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Warren Buffett spent $7 billion to $8 billion on positions in Delta Air Lines, United Airlines, American Airlines, and Southwest Airlines. In 2021, as the scale of the Coronavirus-induced lockdown became apparent, the Oracle of Omaha, Warren Buffet sold all his airline stocks. This was no casual decision, Buffet has said that his favorite holding period is “forever” and his strategy is to buy companies, milk them of cash, pay no dividends, and compounds his returns by holding.

Why did Warren sell? Well, you don’t have to be an investing genius to see any virus that stops global commerce will affect business travel and thus reduce revenues flowing to airlines, thus airlines stock prices were going to fall. Buffet got out to avoid a diminution in the value of his position.

At the 2021 Berkshire Hathaway Annual Shareholders meeting Buffet said he diverted so the airlines would find it easier to get the CARES Act government funding, ok but the story is not about Buffet but about what happened when he sold.

Usually, Buffet buying a stock is a stamp of approval on that stock, ditto when he sells. When Buffet sold in May 2020, the shares of the US-based airlines tumbled with American Airlines falling 7.7%. After Buffet sold, stock of the airlines rose in April as retail investors bet against the judgment of Buffet.

READ: Where to invest N500,000 right now

Was Warren Buffet wrong?

Let us take a look at another example. Hertz filed for bankruptcy in May 2020, meaning that its stocks became worthless, its shares kept falling to as low of $0.40, yet its stock appreciated in price to a high of $6.00 as retail investors (again), many of them on Robinhood, pumped up purchases on this stock because it was rising in price, in essence creating a self-fulfilling buying hurricane and pumping up a stock worth zero. The higher prices were trailed by even higher demand.

Were the retail investors naïve? No, they understood the risk when  Hertz tried to take advantage of the demand by selling new shares with this clear warning: “we expect that common stockholders would not receive a recovery through any plan unless the holders of more senior claims and interests, such as secured and unsecured indebtedness are paid in full.

READ: Why Warren Buffet’s $4.6m lunch with Bitcoin entrepreneur is experiencing delay 

So what’s going on? Is investing dead? We can argue that retail investors bought into Airlines because they were aware the US government would rescue the airlines with a package worth billions. They also anticipated that the stock price having fallen so low represents a discount to the existing price. They were buying low to eventually sell higher.

Why would retail investors buy a bankrupt company? It appears the rules of investing have evolved from buy low to sell high, to buy high to sell higher.

The price of any stock used to be the discounted present value of all future earnings, thus if I say the price of Zenith Bank today is N20, I am stating that if I take all earning of Zenith Bank from the future and discount them back to today using an agreed discount rate, I will arrive at N20. The P.E. relates the price of the stock to the earning and is often looked at as a measure of how expensive the stock or market is when compared to earnings. The PE of the US markets as measured by the Schillers CAPE valuation is at 36.6. this represents the second-highest level, since 1890. CAPE looks at the last 10 years of earnings adjusted for inflation.

Investing was a “simple” exercise in seeking to determine the intrinsic value of a stock, using fundaments such as market share and earning and then buying if intrinsic value is less than the market price and vice versa. Not anymore!

This goes far beyond traditional assets, there is an uptick in selling prices of alternative assets such as NFT and cryptocurrencies, with cryptocurrencies like Dogecoin up 675% in 3months.

So is investing dead? Not yet. The issue is liquidity, excess liquidity in the US. The average retail investor has seen two stimulus cheques from the US governments and interest rates at record lows. This means the average US investor has an incentive to take on more risk to earn above safe fixed income yield. Another driver is the record appreciation in home prices, especially in the suburbs. Many American homeowners can take “equity” (difference between home value and mortgage, if any) from their homes at record low rates and invest. This excessive liquidity is looking for where to “park” and is showing up on heightened valuations aka “bubbles.”

In Finance, there is a theory called the Greater Fool theory, where prices can keep rising as long as the current holder of any asset can sell that position to another investor at higher prices. The new holder then sells to a new investor at a higher price and so on. We are watching that right now.

Jaiz bank

In the long run, the market will correct, and valuations will again reflect earnings, the trigger will be the decoupling of the US Federal Reserve from bond-buying and the rise in yield which signals inflation. My advice to any investor is to ensure that when the market corrects, you are vested in quality assets.

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Financial Services

How to invest in Nigerian Eurobonds

Before investing in Eurobonds, weigh the bond’s risk characteristics and set them against the interest rate to know if it is worth it.

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Treasury Market T-bills, African Finance Corp. issues $750 million 7-year Eurobond at lowest yield to date

As of 2019, Nigeria’s Eurobonds were regarded as one of the top 5 best-performing Eurobonds in the world.

Although Nigeria’s Eurobonds remain one of the most profitable in the investment world, not many individuals know how to invest in them. The Federal Government and a number of corporate organisations in the country subscribe to Eurobonds and issue them quite often, lending credence to their attractiveness as an investment tool.

What is Eurobond?

Basically, Eurobonds are financial instruments issued by a country or corporate organisation in a currency different from the currency of the issuer.

Nigeria typically issues Eurobond instruments denominated in US dollars. For example, the 6.75% $500 million January 2021 Eurobond was denominated in US dollars.

There is the sovereign, which is referred to as a government bond, and the corporate bond. Eurobonds operate like fixed income securities in terms of bond instruments. It has a coupon, an interest rate paid on bonds (which is paid bi-annually), a price at which the bond will be purchased, and also a yield.

The price and yield have an inverse relationship meaning that when the price goes up, the yield comes down. When the yield is coming down, the instrument is trading at a premium compared to when it was issued.

An investor can buy Eurobonds while the primary auction is ongoing or later, at the secondary market, for those who were unable to participate in the primary auction.

READ: Nigeria’s Eurobond yield hit 12.8% as investors flee emerging markets

How to invest in Nigerian Eurobonds

The process of investing in Eurobonds in Nigeria is not any different from that of investing in local bonds. Both bonds can be bought from either the primary market at the initial offer level or at the secondary market for existing bonds.

All that is required is for the investor to complete the tender for the Federal Government of Nigeria or corporate bonds form, submit the tender through any of the authorized dealers and make the required payment when the bid is successful.

Basically, for banks, your account has to be funded with the desired currency. For instance, to buy a dollar-denominated Eurobond which is the conventional one issued in Nigeria, you have to fund your account with dollars, then send an instruction for the bond purchase.

READ: FG redeems $500 million Eurobond

Be mindful of the bond’s risk profile before investing

Eurobonds can either be corporate or government bonds. Corporate bonds may offer higher interest rates than government-issued Eurobonds but they also come with higher risk.

If you want to invest in Eurobonds, ensure that you weigh the risk characteristics of the bonds and set them against the interest rate to know if it is worth it. Most Eurobonds come with credit ratings, which serve as a measure of their quality and risk profile.

Usually, bonds with the highest quality credit ratings come with the lowest yields while bonds with lower credit ratings offer higher yields. The yield, in this sense, is a measure of the bond issuer’s creditworthiness meaning that the greater the credit risk on an investment, the higher the yield investors would demand to compensate for it.

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READ: Investing in Nigerian Bonds – A Beginners Guide

How to obtain an FG Eurobond

When bonds are issued at the primary market, the issuance document contains a list of the banks or brokers that have been authorized to sell the bonds. The FGN issued bonds are purchased through the Primary Dealer Market Makers (PDMMs). These are banks appointed by the Debt Management Office (DMO), to act as authorized dealers of FGN bonds.

Can you fund a Eurobond with a naira account?

Not at the moment! You need a dollar account (domiciliary account) that is funded but your bank can easily guide you on how to obtain one.

Next is to fill out instruction documents after which the bank will send you a market price and the expected yield. The bank then debits your account for the purchase. Every six months or on the specified coupon dates, you will receive your coupon and at maturity, you will get your principal back if the issuer does not default. A coupon or coupon payment is the annual interest rate paid on a bond, expressed as a percentage of the face value and paid from the issue date until maturity.

READ: How to read stock market tables

Here is a simplified example of the process:

You walk into a branch of your bank and ask to purchase $100,000 worth of Eurobonds. Note that your domiciliary account should already be funded with the amount. You would be required to fill out and sign the letter of instruction which would then be sent to the bank’s treasury unit for processing. The treasury unit responds with the available Eurobond prices and requests you to confirm the purchase. When that is done, the treasury unit executes the deal and holds it in their custody.

You can also sell the bonds at the secondary market.

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Minimum investment as an individual

The minimum conventional investment tranche is $200,000, but a $100,000 worth of investment is also permissible. Amounts lower than this are however problematic because the secondary market trades in tranches of $200,000.

READ: Your “beard gang” is affecting the valuation of this global firm

Can people invest through mutual funds?

Basically, what mutual funds do is amass investors’ funds and buy Eurobonds in the secondary market. A mutual fund is just like a vehicle that helps you to buy bonds so that you are not faced with the issuer’s risk directly. Therefore, individuals or institutions can also buy Eurobonds through mutual funds.

Mutual funds make it possible for you to participate in bond-buying with less than the statutory amount since they operate by pooling resources together from a large number of investors.

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