The Great Resignation

Foreword

Beginning as early as Q1 2021, there was a lot of consternation from employers about an unusually large number of employees resigning. Coupled with a seemingly general lack of available candidates to fill in those empty roles, it seemed for the past year or so that a large number of workers just simply decided to stop working altogether.

As usual, a reminder that I am not a financial professional by training — I am a software engineer by training, and by trade. The following is based on my personal understanding, which is gained through self-study and working in finance for a few years.

If you find anything that you feel is incorrect, please feel free to leave a comment, and discuss your thoughts.

I quit!

The Great Resignation seems to have started around Q1 2021, though it really picked up steam around mid 2021 through the end of 2021 and into early 2022. A lot of ink has been spilled about potential causes, amongst which include job dissatisfaction, fear of Covid, as well as being unable to work due to Covid.

Left unsaid was how those folks were going to support themselves, especially since a large number of those who quit were relatively young, and thus not eligible for various retirement/social security schemes.

Anecdotally speaking…

From my personal experience, it seems like the enabling factor for many of these folks to essentially retire early, was a booming, speculative market, especially in crypto. Talking to various people in different forums, the common theme I’ve found, was that those who have decided to retire early all fell into one (or more) of the following categories:

• Got into crypto early, and at least at the end of 2021, had a large crypto portfolio.
• Began day trading stocks and/or crypto, especially since early 2021, and made semi-stable income from the trading.
• Made a lot of money speculating on options, especially during the Gamestop craze of Q1 2021.

Employment effects

The effects of the Great Resignation was easily predictable — as most of these folks seem to skew towards people in tech related companies, there was an acute shortage of tech employees, especially around Q3/Q4 2021. Many tech companies were offering double digit percentage increases in sign on bonuses as well as annual compensation — I’ve personally had multiple recruiters approach me with 7-figures annual compensation packages.

… and it’s gone

However, something broke in late 2021. When the Fed started talking about raising interest rates in Q4 2021, stocks and crypto started stalling. It was no longer possible to make ridiculous daily returns just by buying random short term calls.

At the start of 2022, this accelerated with dramatic (for that time) drawdowns in all 3 major US indices, cumulating today, with the NASDAQ composite down about 30%, and S&P 500 down about 20% year to date. Crypto fell anywhere between 70% to 100%.

And suddenly, instead of hearing friends and colleagues talking about early retirement, I start hearing about folks who had retired earlier starting to look for jobs.

Triple whammy

While some folks are starting to look for jobs again, the crypto market devastation resulted in multiple brokerages, funds and “banks” running into serious financial trouble. Three Arrow Capital was forced to liquidate, and rumor was it that their inability to settle their margin debts resulted in the insolvency of Celsius, BlockFi, Voyager, amongst others. Even Coinbase, previously seen as a bastion of stability in the US crypto market was not spared.

The stocks market drawdown(1) also has the market spooked, with many openly talking about impending recession, resulting in many companies, even large blue chip stocks, freezing hiring or even laying off employees.

These actions seem to be resulting in a surplus, at least temporarily, of tech workers, resulting in a triple whammy for those looking for jobs:

• Portfolio losses
• Increased competition from retrenched workers
• Reduced job openings due to companies tightening

Short term

In the short term, it seems like there’s going to be pain all around in the form of higher prices, higher unemployment, lower wages(2), lower consumer demand, lousier economy.

On a lark, I’ve initiated some small sized, short term, short positions(3) — you can follow the trades (made on 6/29) by following me on StockClubs(4). Let’s see how that goes!

Footnotes

1. Note that I’m only calling it a “drawdown”, as opposed to “meltdown” or other more bombastic terms as others have used. Because, honestly, 20-30% isn’t that big a deal. If this gets really bad, then we ain’t seen nothing yet.
2. To be clear, it seems like wages are still going up, though slower than inflation. Also, I was referring specifically to tech workers.
3. As always, this is not financial advice. I’m playing with a very, very small portion of my portfolio here, and it’s more gambling than anything else.
4. Full disclosure — StockClubs is an app founded by a friend, and I have made a small investment in that company. I am definitely conflicted with regards to the success of the app.