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Friday, 19 April 2013

Dutch unemployment rises to over 8 percent… and the Prime-Minister made a motivational speech!

The Dutch Central Bureau of Statistics presented its monthly unemployment data. Stating that the Dutch unemployment is rising at an alarming rate currently, would be an understatement.

The following press release comes from the CBS:

Unemployment rises to over 8 percent

According to figures released today by Statistics Netherlands, seasonally adjusted unemployment in the Netherlands rose by 30,000 in March, to 643,000 people.

Figures published by UWV – the organisation responsible for implementing unemployment benefits - show that the number of unemployment benefit claimants rose by 3,000 to 380,000 in March.

Unemployment rose further in the Netherlands in March, to 8.1%. Three months previously, 7.2% of the labour force were out of work. In the first quarter of 2013, another 24,000 people per month became unemployed.

In the last three months, the increase was strongest among 25-44 year-olds. In this age group an average 11,000 people per month became unemployed. Unemployment among over-45s rose by 8,000 a month, among under-25s it increased by 4,000 a month.
Unemployment according to the definition used by the ILO was 6.4%, up from 6.2% in February.

The number people claiming unemployment benefit rose by 0.8% in March 2013. The increase was above average among the over-45s, while the number of people younger than 25 years claiming unemployment benefit  fell slightly.

This is a tell-tale statement. However, there is a difference between reading this statement and looking at a chart, based on the aforementioned data.

As a basis, I took the chart which I created from the January 2013 unemployment data, and added the unemployment data of February and March in it. Besides that, I also collected the youth unemployment for the same period. The resulting chart is real bad news:

Dutch (youth) unemployment 2008-2013
Data courtesy of:
Chart created by
Click to enlarge
Last week, a social agreement was set between the largest labour unions, the employer’s organizations VNO/NCW and MKB Nederland and representatives of the government.

I didn’t write about this social agreement yet, as I didn’t have the time to fully read, translate and elaborate this agreement and not simply wanted to copy-and-translate the content from the Dutch newspapers.

However, summarized the agreement came down to:
  • Adding a pinch of flexibility in the labour market;
  • Throwing a few grains of change into the Unemployment Benefit legislation;
  • Withdrawing all proposed legislation and austerity measures, which were either bad for the employers or bad for the labour unions’ grassroots: the 55-plus generation;
  • And most important… giving the can a smashing kick down the road;

I must admit, I was happy that the Unemployment Benefit and lay off-reimbursements for the newly unemployed 45-plus generation have not deteriorated too much, as a positive consequence of last week’s agreement.

If you don’t make it easier whatsoever for older workers to find a new job, through reforms of the labour market itself, but take away their lay off-reimbursement and their 70% of last earned wage Unemployment Benefit for 2.5 years, then you sentence older workers to a quick fall into poverty.

The unfortunate part is that all three parties involved in this social agreement – labour unions, employers and the government –didn’t do much, in order to make it slightly easier to fire, but especially hire the older workers. These older workers still enjoy the fixed contracts, but once fired, their future on the labour market is currently very, very grim!

The older unemployeds are considered too risky and too expensive to hire, when companies are looking for new workers. These companies rather hire a less experienced 30-plus worker than the very experienced older workers.

The three parties did also not enough about the awkward situation of the current generation of youngsters, with their flexible and zero hour-contracts and their virtually zero percent chance of acquiring a fixed contract, currently. This is definitely a missed opportunity…

And please remember that today’s alarming unemployment data by the CBS are only the tip of the iceberg:

  • The many freelancers that currently don’t have an assignment, are not mentioned in the CBS unemployment data;
  • Neither are the youngsters that have a zero hour labour contract, which supplies them with zero percent certainty for working sufficient hours per month to live or study from;

Although these people are not considered unemployed, you can bet that their economic situation is just as awkward (or even more) as the situation of the official unemployed in The Netherlands. And there is no signal that the Dutch unemployment situation might improve in the coming months. In my humble opinion, the chance for further deterioration of the Dutch labour market is very, very big!

A few days ago, Prime Minister Mark Rutte of the liberal-conservative /social-democrat cabinet Rutte II held a flabbergasting speech, which could be summarized in the following lines:

Let’s stop with feeling pessimistic and miserable. We should go shopping, we should visit a fancy restaurant, perhaps buy a new car or even a new house. 

By doing so, we all help the Dutch economy to get healthy again and we help ourselves in the process.

The not very sensitive and emphatic, but often razorsharp debater Geert Wilders of the PVV ‘Party for Freedom’ (‘give to the emperor what is legally his’) asked the Prime Minister with hardly revealed sarcasm:

“‘Did you eat Magic Mushrooms?! Did you take two slices of Space Cake?!”

These remarks by Geert Wilders made me imagine for a moment, that it indeed had been the Prime Minister, who left the famous ‘Bulldog’ coffeeshop at the Leidseplein square in Amsterdam, at the same time that I left the Stadsschouwburg on the other side. 

Tuesday, 16 April 2013

Online webstores kill the brick-and-mortar stores, people say! Will this be the end of shops as we know them?!

In my mind and in my car, we can't rewind we've gone to far

Today, on 16 april 2013,  I have read two news messages on Dutch retail that were both alarming.

One message came from CBS’s daily press release, this Monday. This was the monthly data on the Dutch retail situation:

In Februari 2013, retail turnover was 4.8% down from the same month last year. The volume of sales shrank by a dramatic 7.2%, retail prices were 2.6% higher, as the most recent figures released by Statistics Netherlands show.

The main reason for the turnover slump was the fact that February had one shopping day less than February in leap year 2012. The effect thereof on retail turnover is estimated at approximately 4%.

The non-food sector in particular had a hard time of it. Turnover and sales volume dropped by more than 7 and nearly 9% respectively. Turnover was down across all non-food branches relative to twelve months ago. DIY shops and textile supermarkets suffered most.

For food, drinks and tobacco shops, turnover loss was just over 1%. Volume shrank by nearly 5%. The difference in the number of shopping days entirely accounted for the lower level of sales in this branch. After correction for this effect, turnover growth was about 2%, although volume still declined marginally.

Unlike traditional shops, mail-order companies and internet shops again generated turnover growth in February, but 1% was the smallest growth in this branch since January 2012.

These CBS data are alarming in their own right, but they give you hardly the big picture. I marked the red text, because there is something peculiar in it.

I can understand that the DIY shops had a hard time in Februari 2013, compared to Februari 2012. Last year, the weather changed dramatically for the better in The Netherlands, halfway-February. This year, the weather in February changed for the worse with winter again setting in. This will have had a negative effect on DIY sales, I guess.

Due to the prolonged winter, people didn’t feel a strong urge to refurbish their house and garden, this year. Nobody likes to do their garden or paint their house, when it is freezing cold.

More puzzling, however, is the declining sales in the textile supermarkets, as these are already at the lower end of the textile spectrum, with in general a very moderate price-level. Although the dropping temperature mid-February could have been of influence (you don’t think about summer clothes when it is freezing cold), I still consider this a worrisome signal. 

People might have skipped the purchase of new clothes, as they perhaps gave last year’s clothes a second round in 2013. This would be a strong signal that the crisis is in fact deepening in The Netherlands.

In order to show what the credit crisis has done to retail sales in The Netherlands, I collected the data since 2005. Although the price increases (caused by inflation and (especially) the (VAT-)tax increases by the Dutch government) blur the picture for the sales value (not printed in the chart), the sales volume litterally speaks volumes:

Retail sales development from 2005-2013
Data courtesy of
Click to enlarge
Since mid-2011, the sales volume in The Netherlands went down at an accelerated pace, with December 2012 being the worst December in many years. This was caused by the crisis, which gained momentum in 2012 and also by the VAT-increase with no less than 2% (to 21% from 19%) in October 2012.

In contrary to what the government pundits say (f.i. Dutch Central Planning Bureau), I don’t expect ANY improvement in the remainder of 2013. Call me a perma-bear, but I believe to have been more right than most government pundits during the last two years, since I started this blog.

Another piece of alarming, but not surprising news was the following article by Het Financieele Dagblad, about the disappearance of 2 million square meters in shopping space in the Dutch cities:

During the next seven years, the actual shopping space will decline strongly in urban areas. A total of two million square feet will disappear, according to an analysis by consultancy firm Booz & Company.

The decline means that 17% of total shopping space will disappear. The main reason is that buyers discovered the internet. Booz forecasts a strong decline in the number of brick-and-mortar fashion stores, as people buy fashion online more often. The number of fashion sold online will rise to about 25% in 2020 from 5.6% now. Today, 20% of electronics and household appiances are sold through the internet and this number will rise to approximately 40% in 2020. The sales in shopping streets and malls have declined by 7%, until Easter 2013. In the same period, the webshops sold 18% more.

These are indeed alarming data.

Nevertheless, you should be very careful with interpreting this data in the way that Booz & Company does for their conclusions. Especially the last red and bold sentences are treacherous; they could make you think that the 7% sales decline in brick-and-mortar stores is fully compensated by the 18% rise in webshops sales. This is not true at all.

For the very important non-food retail industry, about €45 billion of total annual sales came from brick-and-mortar stores, while only €4.2 billion came from online stores in 2011 (source: thuiswinkel). Although the data in 2013 might differ slightly from these two-year-old data, I don't expect very dramatical changes in sales for b&m and online stores.

When in a certain year the retail sales until the Easter period are roughly 20% of yearly sales, you could say that this is about €9 billion for 2011 (€45 billion/5). A 7% decline would amount to €630 million in loss of sales during the period until Easter.

The total online sales until Easter – using the same math – would be about €840 million in 2011. An 18% increase of this number would be about €151 million for this year. This means that less than 25% of brick-and-mortar sales decline is compensated by an increase in online sales. This will not be different for 2013, the year that these data apply to.

Still, I happen to agree with the prediction that Booz made for the disappearance of two millions square meters in shopping space. Not so much as a consequence of the assumption that the online shops will wipe-out competing brick-and-mortar stores. This will be an important factor, but not decisive in my humble opinion.

The excess availability of shopping space and shops is a much more important factor: many cities have built over-the-top amounts of shopping space during the last decade. They took the period 2005-2007 as the starting point for their required shopping space calculations, instead of treating it like the end point, that it was in reality.

Today, there is a massive excess of shopping space and (non-food) shops that cannot survive all in the coming years of austerity. It is exactly this excess space that will disappear from the market: not due to online shopping alone, but merely due to the diminished need for shopping space and non-food shops.

Another factor for the future decline in shopping sales and (thus) shopping space will be the fact that parking has become the cash cow of many, many municipalities, being strapped for cash.

Even the dullest shopping mall in the most rural city ‘pampers’ its fun-shoppers with the hated park-o-meters, requiring between €1.50 - €5 per hour. That really spoils the shopping experience.

My story on my hometown Almere-Buiten already showed how much the municipal greed can kill the retailers, especially at the shopping centers which are not very popular and do not have a pivotal function for their region.

Online shopping will be a factor in the coming seven years, but I wonder if the total sales of webstores will exceed 20% of total retail sales in 2020.

Real shopping is still much more fun than shopping behind your computer screen or iPad. And especially fashion, jewels and shoes are things that you want see on you, before you buy it.

On top of that, I expect that the ample possibilities for toll-free returning of non-fitting clothes and shoes might deteriorate in the coming years, as the rising number of returned clothes and rising postal fees pinch the (narrow) margins of online shops.

Summarizing: there will indeed be less shopping space in a number of years, but not (only) due to online shopping. The real reason will be the wipeout of the excess shopping space that we have nowadays. 

To summarize it in a Buggle-ish way: Just like video didn't kill the radio stars after all, I don't think that online webstores will wipe out the brick-and-mortar stores.

Sunday, 14 April 2013

Leave my pension money in the hands of the people that are responsible for it, please. Don’t squander it on stupid ideas!!!

In 2012, the Cabinet Mark Rutte II in The Netherlands became infamous for producing a government agreement, which seemed more schizophrenic than Harvey Two-Face: The document seemed to consist out of two different documents, which were merged together, seemingly without any mutual points of tangency.

While this government agreement had been produced in a record time, it had to be altered even quicker, under pressure of infuriated party members from Rutte’s liberal-conservative party VVD.

Since that moment, the cabinet has generally excelled in giving in on ever greater parts of their government agreement, seemingly with an understanding smile, and by producing one stupid idea after another.

The latest idea in this range is: forcing the pension funds to invest pension money in Dutch Small and Medium Enterprise. Het Financieele Dagblad writes upon this ‘great idea’:

The Cabinet Mark Rutte has promised to investigate, whether pension reserves could be used for the credit supply to Small and Medium Enterprise.
A special ‘explorer’, appointed by the cabinet, should look at this possibility with the pension funds and Minister of Economic Affairs Henk Kamp. 

Hans Biesheuvel, chairman of MKB Nederland (i.e. SME Netherlands), said to have received this promise from the cabinet, during the negotiations on the Social Agreement, which was set last Thursday evening, April 11.

‘We need more capital and I’m more and more convinced that the banks won’t get their act together for the time being’, according to Biesheuvel. ‘We own a great capital in pension money. Is it not possible to use a small part of this for credit lending? Not for the funding of companies, but for investments’.

With this proposal, the cabinet tries yet again to use the pension funds for solving a funding problem elsewhere in the Dutch economy.

Boy, does the cabinet! 

The cabinet tries to use pension money for mortgages, for funding of roads, banks and healthcare. And now for funding investments in the SME business.

When does this cabinet finally understand that they should not mess with other people’s money!!!

To make it perfectly clear: it is not the obligation of the pension funds and pension insurers to save the Dutch economy! 

It is their obligation to sensibly and profitably invest the deposits of their members / policy holders, in order to get as high yields as possible for their customers: the current workers and current / future retirees.

If the Dutch pension funds / insurers think it is better to invest their money outside The Netherlands, they probably do so for a good reason.

The cabinet should not mess with this pension money, as the cabinet cannot be held responsible for the return on the investments made. The Dutch pension funds, however, ARE responsible. Leave them alone!!!

The Dutch Small and Medium Enterprise does indeed suffer from a funding problem, suffocating some companies, which would otherwise have been more successful. And indeed the Dutch banks do not always have their act together yet. 

On the other hand, the banks still do supply money to people with good ideas. The only difference with 2007 is that banks are much more finicky now and only reward the very best ideas. 

Besides that, this crisis in The Netherlands came from excess debt, excess consumption and excess mortgages. Also in The Netherlands people spent more money than they earned at the end of 2007.

This crisis is not something ‘not invented here’, which was imported from the USA. The same patterns of failing risk awareness and conspicuous consumption, spurred by fairytale interest rates and ubiquitous optimism, and the same shop-until-you-drop attitude was present here in The Netherlands.

Still, associations like MKB Nederland (the employer’s organization for SME companies) and VNO/NCW (large enterprises) think that the clock should be turned back to 2007, making this year last forever.

People, like Hans Biesheuvel, don’t understand that the people were sick and tired of excess debt, excess housing prices and excess spending. They still don’t grasp that this crisis has been caused as much by the Dutch people, who didn't want to be a slave of their debt anymore, as it has been caused by the banks.

Now, we are in a huge recession (I would say ‘depression’): people are afraid of losing their jobs, their house and their lifestyle and keep their money firmly in their pockets. Their consumer confidence is almost at an ‘all time low’. This probably won’t change in the coming months or even years, until all the financial misery and all bubbles are lifted out of the market and people can finally get confident again.

At the same time, this unfortunate cabinet is trying to squander the people’s hard-earned pension money on all kinds of economic castles in the air, as it doesn’t want to accept that we are in a recession/depression, which might take years to overcome.

The cabinet still thinks that if we say to ourselves”everybody happy?!”, that everybody will be happy at the blink of an eye. Just like the ‘false sirens’ from employer’s organizations, like VNO/NCW and MKB Nederland

At the same time, the cabinet and the local governments are trying to “steal” our hard-earned money, by filling all financial potholes in their annual budget with tax money and by deploying higher traffic penalties, higher local taxes, higher parking expenses, higher VAT (i.e. value added tax) and higher taxes on insurances. And now they are trying to steal our pension money too.

In return, the cabinet still didn’t develop a master plan for:  
  • lower and higher education; 
  • the banking industry; 
  • the agricultural industry; 
  • the environmental industry; 
  • the Building and Construction industry; 
  • the ICT industry; 
  • the manufacturing industry
and all other industries that would benefit from a thorough ‘grand vision’ by this cabinet.

Unfortunately, this cabinet doesn’t have this grand vision… at all and rather kick all kinds of cans down every road that they see.

At least, they should have the decency to stay away from our pension money!

CEO Jan Bennink of DE Masterblenders: Corporate Vulture or Shareholders’ Hero?

It was only one year ago when the immemorial Dutch coffee brand ‘Douwe Egberts’ was released from a unhappy marriage with the American company Sara Lee Corporation.

Douwe Egberts, the Dutch ‘Maxwell House’, and active in the coffee industry since 1753, initiated an IPO at the NYSE/Euronext Amsterdam stock exchange, as a ‘happy single’ under the pompous name DE Master Blenders 1753 NV (DE:NA).

Douwe Egberts had been the best sold coffee and tea brand in The Netherlands for ages. Through its smart customer loyalty program (‘saving value points on coffee and tea in exchange for free gifts at the DE gift shop’) going back for decades, it had bound millions of loyal customers who only drank Douwe Egberts coffee and Pickwick tea.

About 12 years ago in 2001, the company created a sales monster with the hugely successful Senseo coffee machines and coffee pads, which gave their customers the ‘look and feel’ (albeit not the taste) of espresso coffee, for the price of little more than filter coffee. The clever and beautiful, ‘no frillz’ design of the coffee machines and the easy-to-use coffee pads hit the Dutch and foreign coffee markets like a hammer.

However, a few years ago, the party seemed slightly over for Douwe Egberts.  According to some analysts, this was a consequence of Sara Lee underinvesting in the valuable brand.

The ‘trendy’ Senseo coffee got out-of-fashion and, on top of that, the coffee pads were not protected by copyright. This allowed all supermarket chains and other coffee brands to produce their own coffee-pads, thus eroding the profits for Douwe Egberts.

Besides that, the brand had obviously missed the boat at the vast market for luxury espresso coffee, in comparison with the hugely successful and highly profitable espresso-coffee formula ‘Nespresso’ of its main competitor Nestlé.

Although Douwe Egberts generally sold coffee of good quality and still counted many loyal customers, their espresso coffee had never been so famous, expensive and good as Illy coffee, not so Italian as Lavazza or Segafreddo coffee and not by a million miles as trendy, innovative and profitable as Nespresso coffee, which had been sold for 'top dollar' per pad.

Summarizing, the brand had in fact a quality, innovation and image issue. However, that would all change after the company would stand on its own two feet again…

Under the leadership of CEO-at-the-time Michel Herkemij and chairman of the supervisory board Jan Bennink, the brand had the ambition of becoming the worlds No. 2 coffee brand. 

Things went… a little different.

Shortly after the IPO, a bookkeeping scandal occurred at the branch of DE in Brazil. Profits there had been rigged by the local management, which meant that millions in losses had to be taken by the main corporation.

And also in The Netherlands, a scandal occurred in October 2012: the word was spread by CEO Michel Herkemij himself, that the coffee brand had structurally put 0.5 grams less coffee in the pads than it ought to: 7 grams instead of 7.5 grams. 

This fraudulent behavior of the company towards the customers had lasted for years and years, saving the company millions of euro’s, but eventually abusing the trust of their very loyal customers and shareholders (see the chart).

Stock rates for DE Master Blenders since mid-2012
Chart courtesy of Bloomberg
Click to enlarge
The result of these scandals and the lack of good news was that the stock rate of DE Master Blenders hovered between the €9 and €10 for almost a year, never quite living up to the ambitious promises of its executive managers.

In December of last year, chairman Jan Bennink suddenly pulled a rabbit out of the hat: CEO Michel Herkemij was fired and Bennink's ambition suddenly changed to selling DE Master Blenders to a foreign party.

During the first months of 2013, negotiations were started between DE and JAB. JAB, an abbreviation for Joh. A. Benckiser, is an investment company, closely attached to the family behind the German brand Reckitt Benckiser: the family Reimann. Reckitt Benckiser is a large company, which produces washing detergents and all other kinds of household products.

Last week, the news was spread that JAB offered an official €12.50 per share for DE; about 30% above the stock rate of DE in March, 2013 and about €0,45 above the stock rate during April. Previously, JAB had offered slightly more money for the DE stock (€12.75), but for further undisclosed reasons, this previous offer had been withdrawn.

The following snips come from Bloomberg:

Joh. A. Benckiser, the investment arm of the billionaire Reimann family, agreed to buy D.E Master Blenders 1753 NV (DE) for about 7.5 billion euros ($9.8 billion) to build a coffee conglomerate in the industry’s biggest deal ever.

JAB will pay 12.50 euros a share, the companies said in a statement today, less than the price the parties disclosed they were discussing last month. Amsterdam-based Master Blenders’ board supports the offer, it said in the statement.

The purchase of the Senseo maker, which was spun off by Sara Lee Corp. last year, will give JAB a platform to expand its coffee business both organically and by acquisition, JAB Chairman Bart Becht said today. JAB agreed to buy U.S.-based coffee chains Peet’s Coffee & Tea Inc. and Caribou Coffee Co. for more than $1 billion in total last year.

While the offer is lower than originally suggested, “it certainly looks like a fair price,” said Jon Cox, an analyst at Kepler Capital Markets in Zurich. “I presume JAB’s idea is to establish a global coffee company, something hybrid between Starbucks and Nestle/Nespresso. Competition will be pretty intense between companies.”

Master Blenders shares fell 1 percent to 12.11 euros at the close of Amsterdam trading. JAB and Master Blenders announced on March 28 that they were in discussions that could lead to a deal at 12.75 euros a share, triggering a 25 percent advance for the stock that day.
Master Blenders interim Chief Executive Officer Jan Bennink today attributed the lower price to due diligence in an interview posted on the company’s website.

“In any due diligence process, there’s a couple of positives, there’s a couple of negatives and in the end, we came to an agreement that 12.50 euros is the correct price,” Bennink said in the interview. The deal gives Master Blenders a total value of 36 times earnings before interest, taxes, depreciation and amortization, according to Bloomberg data. JAB’s purchase of Peet’s valued that business at 22 times Ebitda.

And now we come to the title of this article. Jan Bennink was the former CEO of Dutch food and nutricion company Numico, until the company was sold to the French dairy company Danone. Bennink had been the president of Sara Lee’s supervisory board and he has stepped over to DE Masterblenders in 2012, ‘promising to make it the world’s number 2 coffee brand’.

In reality, Jan Bennink has not done very much for the brand, except for cutting costs in the company and reorganizing it, and – according to the Dutch labour unions FNV Bondgenoten, CNV and De Unie – ‘scaring the shit out of the employees’:

According to the labour unions, there has been a lot of unrest during the last half year, due to the reorganization of the company. As a consequence, employees fear losing their job and they are afraid to be briefed for criticizing the management of the company. They are also scared to call in sick, in spite of the high workload in the company.

Nicole Boonstra, manager of FNV Bondgenoten, blames the circumstances on DE Masterblender’s CEO Jan Bennink. ‘He set course for a take-over of the company and did not allow anybody to alter this plan’, according to Boonstra

And now it is cashing time: by making the DE Master Blenders company ‘lean and mean’, through reorganizing it and cutting costs everywhere, Bennink has written himself a check of €12.5 million.

He will earn this money in the deal of DE with JAB, by selling his shares to the German investment company. Of course, this amount is petty cash, compared to the €87,4 million that Bennink earned in 2007, by selling his company Numico to Danone.

The question is now: is Jan Bennink a vulture, who scavenges on ‘empty promises’ and the revenues coming from a good company? A company, which is temporarily in heavy weather, but has in theory a bright future ahead?

Or is he a smart business-man, who earned the shareholders in general a nice premium of €2-€3 on their investments?

I tend to go for the former description…

I personally don’t like chief executive officers very much, who take the money and run, instead of trying to make their company really better in its own right.

He earned some money for the shareholders by cutting costs, but not by structurally changing DE Master Blenders into a better company, with products that attract many new customers, while maintaining the old ones. 

The workers, after a difficult year of reorganizations, will have an uncertain future ahead, as they don’t know what the future will bring under JAB. 

However, things might turn for the better, anyway: the people behind JAB have been very succesful in their own detergent and cleaning product industry and they might turn DE Master Blenders back into a money-machine, famous for innovation, good products and tasty coffee. Time will tell...

Friday, 12 April 2013

Ernst’s Economy for You in discussion at the Smart Talk Sessions

Last Tuesday, 9 April 2013, I had the privilege of being present at the monthly held 'Smart Talk Sessions' in the city theater 'Stadsschouwburg' in Amsterdam, The Netherlands.

Stadsschouwburg Amsterdam,
Picture copyright of; Ernst Labruyère
Click to enlarge
These sessions were organized and hosted by the star presenters Paul van Liempt, Petra Grijzen and Lars Sörensen of Dutch news radio station BNR (

Paul van Liempt,
Picture copyright of: Ernst Labruyère
Click to enlarge

Petra Grijzen,
Picture copyright of: Ernst Labruyère
Click to enlarge

Lars Sörensen,
Picture copyright of: Ernst Labruyère
Click to enlarge
In contrary to BNR Newsroom, where I have been present for a number of times, the Smart Talk Sessions were no semi-live radio broadcast.

The purpose of the evening was to have razor-sharp public discussions on one topic with some of the brightest minds in the business, just for the sake of discussing, learning and networking.

Tuesday’s topic was the Dutch Commercial and Residential Real Estate markets (CRE/RRE), which have both been in distress since 2006/2007.

Guests of the evening were:
  • Ger Hukker, chairman of the Dutch association of real estate agents ‘NVM’;
  • Rudy Stroink, ‘crashed, burned and uprisen’ real estate entrepreneur, formerly of Trammell Crow Netherlands (TCN);
  • Kees Jan Verplanke, co-founder of real estate auction and mediation company;
  • Kees de Kort, brilliant macro-economist and economic commentator of BNR. Kees is 'Holland's favorite perma-bear’; 

It was a fruitful evening for the objective listener. Ger Hukker, the chairman of the realtors and optimist-by-vocation started the discussion with Rudy Stroink, the former managing director of TC Netherlands.

Rudy Stroink shared his first-hand experience on the rise and fall of a Commercial Real Estate company (CRE) in ‘the wild zeroes‘. 

Rudy Stroink (formerly TCN),
Picture copyright of: Ernst Labruyère
Click to enlarge
TC Netherlands had its heyday in the booming years of the Dutch CRE market before 2007. In those days, the banks, the municipalities and the project developers were all in the grip of ‘bigger, higher and more prestigious’ Commercial Real Estate. The sky was not the limit, but only the beginning.

The interest on loans and credit lines was ridiculously low in those years and risk awareness was so minimal, that the banks themselves almost delivered the wheelbarrows to take the stock-piles away, formed by multi-million euro loans

For TCN and other large project developers and investors in CRE, it had been a nice, wild ride, as long as it lasted. Everything changed when the CRE-market started to slump in 2007 and things got far worse when the credit crisis gained momentum at the end of 2008.  

The unavoidable end for TCN (and many other project developers) came in 2012, when the company defaulted, leaving an unfinished debt of €70 million behind. Rudy Stroink and many others learned a lesson the hard way in those days.

Ger Hukker of NVM spoke about the extremely difficult situation on the Dutch housing market, where there seems to be no light at the end of the tunnel yet. Many real estate agents saw their business decline or even totally disappear, leaving them no other option, then defaulting.

Ger Hukker, NVM
Picture copyright of: Ernst Labruyère
Click to enlarge
He and Stroink pointed at the many errors that had been made in the Dutch residential real estate market:
  • The excess mortgage loans to private citizens (sometimes seven times the yearly income), due to the ubiquitous optimism, the very low interest rates and the even lower risk awareness in The Netherlands;
  • The lifestyle of conspicuous consumption among the Dutch citizens, who thought that excess debt was no problem whatsoever, until it became one in 2008;
  • The central government with their fuzzy policies:
    • Initially, the central government was kicking the can down the road, while everybody and their sister already saw that the Dutch housing market was an accident, waiting to happen;
    • Subsequently, the cabinet has been looking for one pseudo-solution after another, while still ignoring the real solution: price and debt destruction;
  • The banks, which lended numerous excess mortgages. The same banks that are still unwilling to take their losses on their CRE and RRE portfolios, but instead persist in their opinion that ‘the emperor does have clothes on’, when it comes to the Dutch housing and CRE market;
  • The greed of the Dutch municipalities, who treated every piece of building ground, like it was pure gold and whose appetite for income from building activities has been unsatisfiable during the last decade.

    These building grounds were sold for absolute peak prices until the Dutch house-buyers said: ‘enough is enough’.
     Since then, municipalities got stuck with acres and acres of unsold building ground, which weighs heavily on their balance sheets; 

Kees de Kort coloured the discussion with his sometimes obstinate comments and his bright views on macro and micro economics and behaviour of citizens: 
  • Initially, when their future looked bright, there was total risk unawareness among the Dutch citizens. These took excess mortgages without blinking with their eyes, aided by the large Dutch banks, which had only dollar signs in their eyes. 

  • Today, risk awareness is total, as everybody is afraid for his job, his soaring household expenses and taxes and his dimishing investments and savings.

    This risk-averse behaviour leaves the Dutch housing market in an almost totally stalled situation, in which almost every buyer waits for housing prices to drop further and further, while sellers don't want to lower their prices, due to their risk for residual debt.

Kees de Kort en Kees Jan Verplanke
Picture copyright of: Ernst Labruyère
Click to enlarge
The tenor of the evening was not very optimistical. Hukker, Stroink and De Kort and the  presenters all agreed that there was little to be done about the process of price and debt destruction in the Dutch housing market.

People are keeping their hands in their pockets and wait for prices to drop further, while housing sellers are very reluctant to sell their houses at a lower price, due to the risk for large residual debt. The banks on their behalf are very reluctant to valuate their housing portfolio ‘marked-to-market’, due to the financial downside risks of such an operation for their solvability and perhaps even liquidity.

The Dutch CRE market is currently critically ill, with a substantial overcapacity and (mostly structural) vacancy of 17%, out of total office space. There are no easy solutions whatsoever. There are just too many office and small business buildings in The Netherlands and local governments maintained building new office space for much too long.

Some office buildings can still be sold as-is, other buildings can be sold or rented after a refurbishing operation. However, there is also a large part of those vacant buildings that will remain vacant for eternity. Especially Stroink pointed out that this can become a societal problem, due to the bill for these vacant buildings. 

At any given moment, this bill will land at the Dutch tax-payers. Also the consequences of pauperization of vacant buildings and industrial zones should be incorporated, as these could lead to petty criminality and unsafe situations.

On the other hand, there was also a glimmer of hope for the Dutch CRE market. This came from the very young (22 years), but gifted entrepreneur Kees Jan Verplanke.

He and a few friends from university started (i.e. ‘rental bids’). 

This is not an auction site for CRE in the true sense of the word, where people must make irrevocable offers on real estate, in which they are interested. 

Instead, Huurbieding is a site where interested buyers and would-be renters of real estate can make an informal offer for the CRE of their choice.

Subsequently, this offer can be the starting shot for negotiations between sellers and buyers or tenants and landlords for office space. Thus, Huurbieding already helped many sellers and buyers to come together in the Rotterdam region.

All guests and even Ger Hukker of NVM, the realtors organization and a direct competitor of Huurbieding, could appreciate the bold, successful approach of these young entrepreneurs and the transparency that this startup brought to the opaque CRE-market. In this market, actually earned rental and sales prices of sold/rented buildings had been ‘the best kept secret’ in the business.

Summarizing, the Smart Talk Sessions have been an evening well-spent with fierce, but good discussions and an involved and interested crowd.

It may be a disappointment for many visitors and for my readers that even these experts didn’t have a straight-forward solution for the crisis that the Dutch CRE and RRE markets are in currently, other than price and debt destruction.

However, everybody agreed that the Dutch central and local governments must get their act together, in order to not let the Dutch housing and CRE market further slide away. For the rest, this crisis will pass too!

One last comment: 

I endorse the Smart Talk Sessions and the people who are organizing it. I don't earn any money or favors with this endorsement.

The Smart Talk Sessions are totally free, except for a few hours of your precious time. I found it a wonderful experience and I am planning to also visit the next Sessions. 

I hope you do this too, when you are in The Netherlands on the 14th of May. You won't regret it. 

Registering is possible at: 

Wednesday, 10 April 2013

About the need for reforms within the Dutch lay-off reimbursements and the Dutch Unemployment Benefit law: my answer to Martin Visser’s column of Monday, 8 April

One of the nicest and savviest Dutch journalists in the business is Martin Visser of Het Financieele Dagblad (

The former correspondent for European Affairs (i.e. ‘Brussels’) and current correspondent for the national affairs section (i.e.’The Hague’) brought his unique insights to the FD readers during the heydays of the Euro-crisis and wrote a very interesting book about it.

Martin Visser is also a keen opinion maker with his weekly columns in the FD on the Dutch political situation and mostly I happen to agree with him and his opinions. However, this week I didn’t, for a small, but very important part of his column…

Martin wrote in his column about the ‘polder model’ (i.e. the Dutch way of negotiating between employers, labour unions and the government), which seems to go through a revival lately: the large labour unions and the employer’s organizations VNO/NCW and MKB Nederland are all working on a social agreement, which can be used by the Dutch cabinet as a basis for social/economic policy in the coming years.

He comes to the justifiable conclusion that the labour unions and the employer’s organizations themselves have been partly responsible for the crisis in the Dutch housing market, the pension system and the financial industry in The Netherlands, by frustrating past changes upon these important issues. This is where I totally agree with him.

However, the following snips of Martin’s column contain the lines that I disagree with:

It is a scary thought that the same opponents of structural reforms [Chairman Ton Heerts of Dutch labour federation FNV and Bernard Wientjes of employer’s organization VNO-NCW – EL] may now dig in the cabinet policy and take the unpleasant parts out, while putting in some extra pork at the same time.


Both gentlemen think that Rutte should slightly ease the Dutch budget policy for 2014. When Wientjes and Heerts really agree upon this, then they should actually finish their negotiations.

To be clear, if you think that Rutte should stimulate the economy in 2014, then it should happen under one condition: ruthless reforms, just like the cabinet is planning for the Unemployment Benefit and the lay off reimbursement. You simply can’t postpone austerity measures and reforms at the same time.

The Dutch labour market is currently in an devastating split position:
  • Youngsters until 30-35 have a very small chance (‘of a snowball in hell’) for receiving a fixed contract from their employers:
    • Instead, they are forced into short/medium term freelance contracts, payrolling contracts, flex-contracts for a (half) year and the worst variety: zero hour-contracts (“we’ll call you later this week to tell you for how many hours we need you, next week”);
    • These contracts leave youngsters with virtually no possibility to build up decent household savings, a career and a house in which they can raise a family. Every end-of-contract period, Damocles’ sword hangs above their heads: ‘Will I be fired or not’;
    • Besides that, banks will refuse them a loan, because they pose a too big risk without a steady income and even landlords or housing cooperations might refuse them a simple rental house for exactly the same reason; 

  • Older workers (above 45-50 years) often still do have fixed contracts. However, when they are fired, it is extremely hard for them to find a new job nowadays:
    • Due to the difficult economic situation, more and more older workers are either fired individually or during mass lay-offs. Their fixed contract does not give them much protection anymore;
    • Companies are often prejudiced about older workers, thinking they are not as productive as younger workers anymore and besides that, they are ill more often;
    • Second, older workers do earn higher salaries in general, which do not fit in the remuneration policy of new employers anymore. Unfortunately, not every worker at this age is able to take a step back in salary, as many of their fixed expenses cannot be reduced quickly. As a consequence, many older workers need more time to find a new job than their younger counterparts.
    • Rutte’s Cabinet advocates one year of Unemployment Benefit, based on 70% of the last earned income, followed by one year of UB, based upon welfare level. Such policy either forces long-term unemployeds to sell their houses, or to wait a little longer with paying their bills, with mounting debt as a result;
    • These days, lay off-reimbursements are more and more paid in kind. Instead of paying laid off workers ‘a pile of cash’, employers pay for outplacement programs, thus helping their workers to find new jobs. However, when such a program is finished unsuccessfully, the unemployed worker still needs his Unemployment Benefit.

My conclusion: Martin Visser is absolutely right that reforms are necessary, but he points in the wrong direction.

There is too little flexibility in the Dutch labour market for older workers and much too much flexibility for younger workers these days:
  • If you don’t make it easier whatsoever for older workers to find a new job, through reforms of the labour market itself, but take away their lay off-reimbursement and their 70% of last earned wage Unemployment Benefit for 2.5 years, then you sentence older workers to a quick fall into poverty;

  • If you don’t make it easier and more attractive for companies to give younger workers a fixed contract, after one or two flex-contracts, then you sentence younger workers to a life of insecurity, without the assets of older workers, like a house, a decently filled piggy bank and the chance to raise a family;
  • If you soften up dismissal laws too much, without installing some kind of legal safety net for workers, then people can be fired at will, whenever a cheaper worker comes around (Romanians, Bulgarians, Russians and Indian workers);

A cabinet that finds a solution for these three bullets, by reforming the labour market in a sensible way, will have my blessing.

As Martin Visser, didn’t do so and looks in the wrong direction with his proposal, I disagree upon the main conclusion of his further excellent column!

Tuesday, 9 April 2013

Russian president Putin in Germany and The Netherlands: why all three countries are in it for the money.

‘We’re only in it for the money’

The last two days have brought the longawaited moment, that President Vladimir Vladimirovich Putin of Russia visited Germany and The Netherlands, for a flash meeting with a.o. Chancellor Angela Merkel of Germany and Queen Beatrix and PM Mark Rutte of The Netherlands.

The omens for this visit had not been very favourable in the eyes of the objective, Dutch and German spectators:
  • From a bright, young and well-informed president, who brought to the Kremlin the unspoken promise of a new breed of leaders for Russia, Putin has turned into a grumpy, rude, ‘mucho macho’, power politician over the years, who collected a bunch of (sometimes) dubious henchmen around him and did seemingly everything to remain in charge:
    • Putin extended the serving time for a Russian president from 4 years to 6 years; 
    • He pulled a fast-change trick with his friend, the previous President Dmitriy Medvedev, in order to be able to become Russian president for a third and fourth time;
    •  Putin has been ‘Flying with the birds’, ‘diving for treasures’ and ‘riding like a cowboy on horseback with a naked torso’, to display his physical prowess, while leaving his western counterparts flabbergasted, not knowing whether they should laugh or cry;
  • Putin’s credit in the west had slowly, but surely vanished as a consequence of:
    • The ever tighter grip of Putin on the State Duma (Russian Parliament) and on Russian politics in general, through two parties he founded over the years (Our Home Russia and United Russia) and a movement of youngsters, which sometimes operated like a bunch of strong-arm boys against Putin’s political adversaries; 
    • Putin’s general disdain for serious opposition parties and the way that he makes their opposition virtually impossible; 
    • The two gas wars with the Ukrain; 
    • The corruption of some members of Putin’s Russian goverment and the Russian officials in general; 
    • The dubious expropriations of the Western share of energy joint-ventures, between Russian companies and (a.o.) BP and Shell, in favour of the Russian state; 
    • The dubious role of Putin’s government in the death of former spy Aleksandr Litvinenko, due to polonium poisoning; 
    • The outrageous punishment of the harmless ladies’ punk band Pussy Riot; 
Russia had also its reasons to be angry with the west. Until 2009, the most important reason had been the designated missile shield that ought to be installed in Poland and the Czech Republic: officially aimed against Iranian missiles, but – peculiarly enough – in fact perfectly positioned to stop Russian missiles, when these would be fired at Western countries.

Also, the overtures made by the NATO towards Ukrain and Georgia (Russia’s backyard), upon a possible Nato-membership for these countries, outraged Putin’s government.

Besides that, there had been an increasing usage of Cold War-rhetorics against Russia in the West during the last decade, with Western politicians calling the country a.o. ‘a corrupted mafia state’ and other platitudes and unpleasant words. Often the West seems to forget, what a snake pit Russian politics can be. If you show weakness in any kind, you’re gone in Russia! This should not be seen as an excuse for Putin’s sometimes erratic behaviour, but it might help to explain it.

The ‘latest nail in the coffin’ of Russia had been the treatment of Russian savers at the Cypriot banks Laiki Bank and Bank of Cyprus, a few weeks ago. These savers lost a considerable share of their savings in the nationalization process of these two banks. This process had been spurred by the Euro-group, chaired by Dutch finance minister Jeroen Dijsselbloem.

In the aftermath of the Cypriot events, the former Russian president and current PM Dmitriy Medvedev had spoken some strong words and threats against Germany and German companies in Russia. Russia blamed especially Germany for the fact that the Cypriot banks had not been covered by the ESM (European Stability Mechanism, the emergency fund for Euro-zone countries and banks in need), while earlier rescue attempts of banks within the Euro-zone had been fully backed by the member states.

Nevertheless, although it seemed that the visit of Russian president Vladimir Putin to Germany and The Netherlands would offer a significant chance for unpleasant failure and animosity, this is not what happened.

There is probably one simple reason for this: Russia needs Germany and The Netherlands just as hard, as Germany and Holland need Russia. There is no way of denying this.

Currently, Russia suffers from the phenomena, formerly known as the ‘Dutch Disease’: due to the enormous exploration of oil, natural gas, diamonds, gold and minerals, the country has been flooded with money.

This money enabled the Russian government to let the economy grow at a large rate, by throwing money around and totally refurbishing the most important cities of Moscow and St-Petersburg: miracles were ‘ready while you wait’ and the impossible took only a little bit longer, as the oil and gas paid all bills. The last fifteen years saw the emergence of a true middle-class in these most important cities: people that made an honest buck and became able to buy some luxury and leave their moderate past behind them.

Residential and Commercial Real Estate in Moscow and St-Petersburg skyrocketed, homeowners became rich on paper and supermarkets appeared at every corner of the street, during the last ten years. Millions of Lada and Volga cars got replaced by more expensive cars of Western brands.
At the same time, the rich Russians excelled in conspicuous consumerism and ‘showing off with their luxury’ at an unprecedented scale, making Rodeo Drive in Beverly Hills look like ‘da hood’.

At the same time, the Russian government stepped in the same trap as the Dutch government did before them in the sixties and seventies: it neglected Russia’s main manufacturing industries and other drivers for real jobs and real economic growth, in favour of the ‘easy rush’ that came from the oil and gas.

Russian car brands like Lada’s, Wolga’s and the Gaz minivans, which had been sold by the millions in earlier years, got replaced by their more sophisticated counterparts from Europe, the United States and the Far East. Other Russian products also became a ‘no-no’; not only for the rich, but also for normal Russians, who preferred ‘Europeisky Kadchestva’ (i.e. ‘European Quality’) above the Russian brands that their parents grew up with.

President Putin and PM Medvedev, who are anything, but stupid, understand extremely well that their country needs Western factories and plants as a steady, future driver for Russian jobs, as the ailing Russian manufacturing industries are not able to supply these jobs anymore. This is even more urgent, now that the American ‘shale gas revolution’ hangs above Gazprom’s and Rosneft’s heads, like Damocles’ sword, possibly deteriorating future profits.

German manufacturing companies for cars (Volkswagen, Mercedes and BMW) and other manufacturers of high-tec and labour-intensive products are indispensable for future Russian growth: not only for the products that these brands produce, but also for the jobs that they can offer to the still largely poor and disillusioned Russian population.

Also (partially) Dutch manufacturing companies, like DAF trucks, Shell, Unilever, Philips, VDL, ASML and many others could offer the desperately needed jobs and economic prosperity. These jobs are especially needed in the vast regions outside Moscow, St-Petersburg and the few other cities that really count in Russia. It is at the Russian countryside, where poverty, alcohol abuse, corruption and despair lurk at every corner.

Putin and Medvedev understand that the Russian people need jobs, better circumstances of living and a future without vodka, poverty, corruption and economic hardship, to remain loyal to their politics. Large social unrest could bring a quick end to their reign, perhaps even with fatal consequences for them.

Merkel and Rutte, on behalf of their countries Germany and The Netherlands, desperately need the exports to Russia to keep their economies running.

The Netherlands suffers from economic stagnation, an ailing financial industry that is in desperate need of recapitalization, soaring unemployment and a strongly diminished domestic demand and consumer confidence, leaving the country in a state of anemic and even negative economic growth. The Netherlands is in a state of depression that it can’t get out.

Although the economic situation in Germany is really not so desperate as in The Netherlands, it still seems that the country is at a path of extremely slow economic recovery, with lots of ups and downs. Every time, when it seems that the economic crisis is finally over, the next setback occurs.

The enormous Russian market and its growth potential for the coming decades is just too big to neglect by Germany and The Netherlands. Russia imports for billions and billions of Dutch and German products and agricultural produce.

So, when Vladimir Putin entered Germany and The Netherlands, the thousands of demonstrators protested, while Mark Rutte and Angela Merkel were ‘going through the motions’: both complained about the deteriorating human rights and gay rights and the poor constitutional state in Russia.  On top of that, Merkel gave a lecture against the Russian raids on Western (German) human rights organizations, like Amnesty International and others.

Putin accepted these sermons stoically, placed a few ‘much macho’ wisecracks against German and Dutch reporters and counted his blessings: having an argument is nice, but in the end it is business that counts. And that was exactly the way that Merkel and Rutte thought about this subject too.

So, everything in the end was hunkydory between Russia, Germany and The Netherlands: business is business, y’know!