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Thursday, 25 July 2013

Insider in the matter states: Almere wins the contest for the Dutch national skating temple, after hard and sometimes ugly battle with the Frisian skating lobby.

In The Netherlands, speedskating is the national wintersport for professionals, as well as amateurs. Every winter tens of thousands of speedskaters populate the 24 speedskating tracks in The Netherlands for their favorite pastime in winter. They only go elsewhere when the rare Dutch winters have created enough natural ice to skate on the hundreds of ditches, lakes and canals in The Netherlands.

Speedskating is also very popular as a professional sport in The Netherland. This in contrary to many other countries, where shorttrack skating and figure skating are much more popular. 

Hundreds of thousands of fans visit the speedskating stadiums every year, for the national and international championships. The sport gets also hundreds of hours of coverage on Dutch national television, which attracts national and international sponsors, who are aiming at the Dutch market with their business. This is the reason that there are many possible sponsors with financial stamina in The Netherlands, waiting in line to sponsor individual skaters or whole teams. 

The fact that speedskating worldwide is a very small sport and that it could be removed from the official Olympic sports list, when it doesn't become more internationally oriented, doesn't stop interested companies yet. In contrary to cycling, the sport had little to do with dopage issues during the last four decades and the amount of airplay comes very close to cycling, on a yearly basis. This explains the commercial success of speedskating in The Netherlands.

In Heerenveen, a small Dutch city in the province of Friesland, one of the first indoor speedskating halls in the world was established in 1986: Thialf. This famous hall led to a host of speedskating world records on virtually every distance and, as a consequence of this success, it was followed up by Olympic indoor halls in f.i. Calgary (Canada), Hamar (Norway), Nagano (Japan) and Salt Lake City (US).

Where an indoor speedskating hall was a rarity in the eighties, now many countries contending in speedskating and all former Olympic host countries of the last 20 years have one or more indoor speedskating halls. Through innovative cooling and design techniques, the modern indoor ice tracks managed to become much quicker than the ‘old’ halls in Calgary and Heerenveen. Thialf hall, once an innovative frontrunner for speedskating, is now trailing by a large distance, when it comes to sheer speed and world records. 

This was the reason that the Dutch professional ice skaters demanded better training facilities, to stay in synch with their contestants in countries with more modern indoor tracks. 

In order to facilitate these professional skaters, the Dutch ice skating union KNSB (the national union for speed skating, short tracking and figure skating) ordered a bid for a new, ‘third generation’,  indoor speedskating track, which can compete with Vancouver, Sochi and other very modern indoor tracks for many years to come. 

Three Dutch cities contested in this bid for the new speedskating hall: Heerenveen with Thialf 3.0, Zoetermeer with TranSportium and (my beloved city) Almere with Icedôme all challenged for the ‘national speedskating temple of The Netherlands. In May, 2013, all detailed bid books were received and all plans were defended by the organizing cities against the organizing KNSB and the Dutch Olympic committee NOC&NSF.

Days before the official winner would be presented by the KNSB, a report leaked to the press that Almere’s Icedôme would become the winner of the contest. In the eyes of the KNSB, Almere offered a winning combination for the national speedskating temple: 

  • Free training facilities for the professionals speedskaters;
  • Ample training and leisure possibilities: not only for amateur speedskaters, but also for short-trackers and figure skaters;
  • The complex is closely positioned to the Dutch national airport Schiphol;
  • It offers good possibilities for the organization of concerts and other large events: an important condition for future profitability;
  • A central position in The Netherlands with more than 8 milllion potential visitors within only one hour of driving
  • And last, but not least, the fully private financing, without the usage of public, "tax-payers’" money, where the other two contestants reputedly needed a fair share of public money and guarantees by the municipalities and provinces:
    • The large Dutch building company BAM warranted the building costs of €185 million for the Almere Icedôme;
    • The renowned American operator of sports and concert halls AEG (famous for initially organizing the planned 2011 tour of Michael Jackson) offered a long-term contract for the exploitation of this hall; 

Although the other contestants also had many things to their advantage, it became clear that Almere had brought the best offer. At the end of May 2013, directly after the news leaked to the press that Almere had won the contest, a tidal wave of protests broke out. 

Most of these protests came from angry, Frisian skaters and Frisian ‘nationalists’, who were outraged that ‘their’ Thialf skating hall had lost the contest.

Fair protestors pointed at the fact that Almere didn’t have an impressive skating history (as Almere is less than fifty years old, it doesn’t have an impressive history in anything - EL) and that Friesland laid in the heart of the Dutch speedskating tradition, with the Thialf speedskating hall and its world famous ‘eleven city’ skating tour. 

Some of these people also pointed at earlier, large-scale projects in Almere, which had not ended very successfully, like Omniworld. All things that are obviously true. 

However, there were also arrogant protestors, who were hitting way below the belt, and stated a.o. that Almere and Flevoland (the province of Almere) are bleak, boring and desolate places, where even the dead don’t want to be found. In their opinion, 'putting the national skating temple there would be an offense of every serious speedskater in The Netherlands'. Obviously, they forgot to mention that not every speedskater comes from Friesland and that many speedskaters from the south of The Netherlands don’t like the two hour drive to Friesland every training day; not even to mention the international speed-skaters.

The KNSB was clearly intimidated by the protestors. Besides that, it had a chairman, Doekle Terpstra, who had earlier spoken ‘off the record’, that he would do his best to keep the national speedskating temple in Friesland.

So although the winner initially had been perfectly clear, the KNSB decided nevertheless that it would postpone the decision with a few months to ‘go through the motions’ and scrutinize the three offers once more. They planned to do so with the help of official auditors. These would have to assess the feasibility of the three bidbooks.

Almere, who had contacts and contracts with the builder of the Icedôme BAM and exploiter AEG, was outraged about the postponement and brought the case to the Court of Justice for a civil summary proceedings. Less than a week ago, the Court ruled that the KNSB had to publish the definitive results of this contest within five days. This has not happened yet.

Today,  a good sportsfriend of mine, ‘John’ - obviously not his real name -, who is a real insider in this story, mentioned to me ‘off the record’ that the initiator of the Almere Icedôme had received a telephone call by the KNSB: Almere had definitely won the contest.

Although I have not double-checked this news ( I am not a professional journalist), I believe John in this, as he is a close insider to the topic.

What will happen now probably, is that the KNSB tomorrow will present the official news that Almere has indeed won the contest. Unfortunately, Zoetermeer and especially Heerenveen might try to commit character assassination on Almere, by ridiculizing this city and the province where it is and by trying moral blackmail towards the KNSB. 

On the other hand, I have little doubt that the KNSB must have to stand firm in this matter, as the Court of Justice has settled for a €500,000 non-compliance penalty, when the KNSB not respects the verdict.

The "low blows" by the Friesland lobby might distract from the fact that the Almere Icedôme offer at least seems the least risky for the Dutch tax-payers, as it is fully, privatedly funded, according to the plans.

I will later come back to this news, as I want to look at the risks and threats of this bold plan for the Icedôme in Almere. Like often with publicly/privately financed projects, there is a considerable risk for the municipalities involved (in this case Almere) that the private parties will not stick to their end of the deal. This could form a large financial risk for the Almere taxpayers after all.

To be continued…

Wednesday, 24 July 2013

KPN sells E-Plus for €5 billion and … uses the money to pay a nice dividend: Dutch telecom behemoth suffers clearly from innovation anemia and rather pleases its shareholders.

KPN, traditionally the largest Dutch telecom operator and a former front-runner for innovation in The Netherlands, is a company in trouble.

During the period from 2003-2010, the company has been slowly put asleep by its business model, akin to ‘the goose with the golden eggs’ and it forgot to innovate in time.

KPN’s extremely expensive investments in the German mobile telecom provider ‘E-Plus’ (initial investment had been €20 billion in 1999, of which €13.7 bln already was written off in 2002) and UMTS (3G mobile internet network, also costing billions of Euro’s in initial investments), at the beginning of this century, had almost brought the telecom behemoth to its knees.

Nevertheless, after the pain of these seemingly awkward investments had been taken in the early years of ‘the zeroes’, the company profited from the steady cashflows that these investments delivered:

Domestic services, like fixed telephone, ADSL broadband internet, glassfiber internet and stacked services like 'internet + telephone + television', as well as mobile telecom services, with their cash cows SMS messages, domestic telephone calls and especially roaming calls (calls outside the national territory at horrific prices) all seemed like the ‘money tree’, which you only had to shake to get some.

The low costs and high yields of the roaming calls, mobile internet and SMS messages, which were not yet stopped by EU regulation, turned KPN into an investor’s sweetheart. The company paid high dividends to its shareholders, but unfortunately ‘forgot’ to invest in innovative technology. 

This lack of innovative investments turned the company slowly, but steadily from a front-runner into a laggard.

And then, in 2011, the party seemed suddenly over for KPN: the dropping price per mobile megabyte, emerging telecom price regulation from the EU and especially a host of free smartphone apps (a.o. Twitter, Whatsapp, Ping and Skype), which enabled users to avoid the expensive telecom services ‘roaming calls’ and SMS, created havoc in the business models of the large telecom providers. 

On top of that, the habits of smartphone users changed too: calling became much less important for the heavy smartphone users (read: adolescents and business men), in favor of all kinds of free messaging services.

KPN saw its cash flows erode, while at the other hand the necessary investments to deploy the groundbreaking 4G hi-speed, mobile internet would cost billions of Euro’s. These developments forced KPN to skip the dividend payments for 2012 and, to made things worse, it had to surprise its share-holders with a €4 billion follow-on stock offer. Especially the latter shocked KPN’s shareholders, among whom was Carlos Slim, the multi-billionaire and chairman of Mexican telecom provider América Móvil. Slim lost billions of Euro's in the process, due to plummeting stock-prices.

Today, the news was presented that KPN sold its subsidiary E-Plus to the Spanish telecom provider Telefónica for roughly €8.1 billion: €5 bln in cash and 17.6% of the Telefónica Deutschland (Germany) stock, with a current stock value of €3.1 bln.

The destination for this large amount of cash was rather sobering: KPN wanted to reinstate its dividend payment program at shorter notice than originally planned and it also wanted to lower its debt.

Here are the pertinent snips from a news message on BNR News Radio:

KPN sells its German subsidiary E-Plus to its Spanish peer Telefónica. This news was presented by the telecom corporation on Tuesday, 23 July 2013.

The company receives €5 bln in cash and an interest of 17.6% in Telefónica Germany, putting the total amount to €8.1 bln.

KPN uses the yields of this deal to extend its financial possibilities. The company is at least planning to resume its dividend payments. These payments had to be scrapped last year, due to the disappointing results of the telecom company.

KPN expects that the sale will cause a book loss of €1.3 billion euro in Q3. The eventual size of the depreciation will depend on the valuation of the stock interest in Telefónica Germany.

The money will be used to extend ‘the financial flexibility of KPN’, according to the CEO of KPN, Eelco Blok. “This means reducing debt, as we will lose a substantial part of our yields, coming from this German branch. So this has the highest priority”.

Blok doesn’t want to exclude new future investments. “However, first we want to resume the dividend payments, that we had to stop earlier. Already in 2014, when we assume that this transaction will be finished then, instead of at the end of 2015”.

What the CEO of KPN Eelco Blok means to say through this news message is:

“Dear shareholders.

We have sold E-Plus, which was a bleeder at the beginning and also at the bitter end.

In 1999, when we paid €20 bln, we have blatantly overpaid for this company and that has costed us dearly. We almost shipwrecked our company through this investment and through our second bleeder in those days, UMTS. 

The yields, coming from E-Plus in the years after these events, were never quite enough to earn all this lost money back. Within two years after 1999, we already burned up €13,7 bln on the E-Plus investment and the only way to earn this money back, was by scr*wing you with our peak tariffs and with all hidden expenses for our services.

However, this possibility largely ceased to exist in 2011, due to these frigging EU busybodies with their telecom regulations and to all those darn free smartphone apps.

As E-Plus promised to become a bleeder again and we couldn’t afford to deploy 4G mobile internet in Germany for it, we sold the whole joint to Telefónica for 8 bln euro bucks.

We haven’t found a profitable business model yet, in spite of our two year survey for successful businesses. Consequently, we are utterly clueless about how to invest the €5 bln in cash money profitably.

Therefore we have decided to do something about our debt and further we play for Santa Claus at the international stock exchanges. We hope that our shareholders don’t notice that we are clueless and that they will start to love us again.

With kind, but desperate regards.

Yours sincerely,

Eelco Blok
CEO (and boxing ball) of KPN”

I understand it, Eelco and I see the problems in disguise that you have presented today. 

However, Ernst's Economy for You would not consider for one pico-second to invest in KPN, not even when I would get the stock almost for free. 

Today’s trick cannot disguise that you and your employees all seem utterly clueless about the future of telecom in The Netherlands and abroad. And that is really bad news for investors; something which future dividend payments cannot sugar-coat.

Monday, 22 July 2013

“Not in my backyard”: Australia refuses Asian boat refugees entrance and instead immediately sends them to Papua New Guinea.

What's the point in caring for you?
You're gonna die anyway

“With great power, comes great responsibility”

There is an enduring and enlarging trend that rich countries try to bar refugees from poor neighbouring countries or overseas, even if these people ran away in order to save their own lives.

Infamous examples have been: 
  • Mexicans who tried to pass the United States border in order to find work and have a better economic future or to get away from the drug-related violence in their neighbourhoods;
  • African refugees, who tried to reach Ceuta and Melilla (Spanish territory), Malta or Lampedusa (Italian territory). Often these people were immediately sent back in their wobbly and dangerous boats by the European coast guard, where an almost certain shipwreck or dehydration awaited them. Others were kept in special imprisonment camps for refugees, sometimes under inhumane circumstances, waiting for their abolition.
Many Mexicans and numerous Africans perished in their attempts to reach ´safer shores’. Hundreds of Mexicans died, while trying to cross the American, fortified borders and at least 20,000 Africans drowned in their attempts to reach Lampedusa alone.

Today, the Australian PM Kevin Rudd decided that Asian boat refugees will never be welcome to the Australian mainland anymore, but will be sent immediately to an island near Papua New Guinea instead.

The Dutch newspaper ‘De Telegraaf’ wrote on this story:

Last Friday, the Australian PM Kevin Rudd stated that the country will not accommodate any Asian boat refugees anymore. Everybody who arrives on a boat without a visa, will be sent to a shelter in Papua- New Guinea (PNG) and will never get a residence permit in Australia anymore. Rudd stated this in Brisbane, accompanied by his colleague from PNG, Peter O´Neill. Rudd closed a new deal with O´Neill in order to prevent Australia from frontier-running and human trafficking.

Rudd acknowledged that it is a tough decision, which is nevertheless inevitable.”Australians are fed up with people drowning in the waters at the north of our country”. Parliamentary elections will be held in Australia at the end of November.

Many boat refugees drown in the waters between Indonesia and Australia, when they try to seek asylum at Australian shores: already five during the last few days. Recently, opposition leader Tony Abbott admonished to “stop those boats”. The constant influx of boat refugees has already been a big concern for decades in Australia. The conservative opposition thinks that the Rudd administration is not able to address the problem.

The ineffective approach towards frontier-running was an important issue for the adversaries of Labor. Only last year, the Gillard administration (predecessor of Kevin Rudd) decided to reopen shelters for asylum-seekers abroad. Those shelters were an invention of the conservative John Howard government (1996-2007). Now, Rudd wants to accommodate all boat refugees in such shelters. Even when these people are eventually recognized as refugees, they cannot come to Australia anymore and will have to settle themselves in Papua-New Guinea.

Let me begin by stating, that I understand that the problems, concerning the Asian boat refugees, should not be underestimated. The European Union has to deal with the same issues at Lampedusa, Ceuta and Melilla, where the influx of boat refugees is also considerable. Large numbers of poor refugees from other countries could eventually destabilize a rich country, especially when the numbers of original inhabitants are quite small and new minorities might gain political and societal influence very quickly.

On the other hand: these potential new inhabitants could also become an opportunity, instead of only being a burden. In the eighties and nineties, The Netherlands had to deal with substantial numbers of Tamil refugees from India and Vietnamese boat refugees. Both these groups of people settled quickly and very successfully in Dutch society. Especially among the Vietnamese refugees, there have been many, very successful entrepreneurs, who established a firm position in Dutch business life. I have little doubts that the Vietnamese and Birmese boat refugees could do the same in Australia too.

Perhaps logical, but nevertheless still unfortunately, both the EU and Australia show an extremely high ‘not in my backyard’ (NIMBY) rate in their reasoning. The sentence by PM Kevin Rudd – “Australians are fed up with people drowning in the waters at the north of our country” – says it all: “we don’t want to see it, so it should go away”. Let’s all assume the ostrich position and put our heads in the sand…

This is a very naive thought by Australia (and Europe), as these Birmese and Vietnamese boat refugees won’t go away, just like the North-African boat refugees won’t go away. You can put them away in a shelter on Papua New Guinea (I don’t want to call it a ‘concentration camp’, but such a shelter remains a nasty phenomenon), cleanly out of sight of worried Australians, but you won’t solve the refugee problem with this. The same goes for North-African refugees, who are ‘accommodated’ in Algeria, Morocco or Tunesia, in order to prevent them from coming to Europe. You might not see these refugees anymore, but you know by heart they are still there, to haunt you.

The current world-wide trend is that countries and continents retreat between their own dikes and borders and leave other people’s problems to other people. The times of the sometimes overly idealistic and optimistic development aid and the ´constructable society´ seem definitely over.

This is a logical consequence of the current, pragmatic, societally sparked developments world-wide, but it totally lacks the pinch of idealism, which is desperately needed to solve the refugee problem for good… Especially from Australia, which started a few centuries ago as a refugee camp/shelter for exiled British prisoners, I would have expected a little bit more civil courage, but alas…

Nevertheless, I am afraid that the Australian and European expectancies, that actions like the one by Kevin Rudd will diminish the number of boat refugees eventually, will be in vain.

The last thing that you can take away from people in despair is that little glimmer of hope. If you have nothing left in life and you live in a country that hates you or neglects you, than you have nothing left to lose. This is the reason that many boat refugees step into their wobbly boats after all, even if their chances for success are very, very dim.

Wednesday, 17 July 2013

The retailer and the lethal battle for margin: is there a solution?!

Yesterday, the Dutch Central Bureau of Statistics showed yet again disappointing figures on the Dutch retail market for May 2013:

According to the latest figures released by Statistics Netherlands, May’s retail turnover was 0.6% down from May 2012. Retail volume shrank by 3.0%, while retail prices were 2.5% higher.

The shopping-day pattern was more favourable in May 2013 than in the same month last year. The positive effect of the shopping-day pattern on total retail turnover is estimated at approximately 2%.

Turnover generated by the non-food sector was nearly 4% down in May. Retail volume fell by more than 5%. Turnover declined across all branches in the non-food sector. Consumer electronics shops and DIY shops suffered most.

Food, drinks and tobacco shops realised a 5% turnover growth relative to May 2012. The growth was largely due to an average price increase by more than 4%. Volume growth was nearly 1%. Supermarkets entirely accounted for the growth in this branch.

With 11%, mail-order firms and online shops generated a turnover growth in the double digits in May compared to the same month last year.

These data don’t show any economic improvement whatsoever and that is worrisome, as it shows that the economic crisis continues in The Netherlands. 

However, there is a much bigger problem, which is haunting many retail shops in The Netherlands, selling all kinds of products: the battle for margin with their competitors starts to look like a ‘cockfight until death’.

Symptoms of this cannibalistic battle until ‘the last rooster standing’ are for instance: 
  • Independent and brand-connected dealers of cars, which are only earning ‘a few hundred bucks’ on small / mid-size new cars of at least €10,000 in sales price;
    • These dealers hardly have a chance of earning more money on (un)planned service, as the service intervals of modern cars get longer and longer, while the break down ratio gets smaller and smaller;
    • Numerous car dealers have perished over the last few years and many more will perish in years to come;
  • Sellers of home electronics (computer appliances, TV sets, hifi equipment etc.) and small household appliances feel often forced to sell their products at costprice or sometimes even below it, due to the murderous competition with the national electronics chains and internet sellers;
    • During the last few years a number of electronics stores chains (a.o. It’s, Harense Smid etc.) with sometimes hundreds of stores simply faded away, because they couldn’t survive the battle for margin with their more powerful German peers;
    • The whole production and sales column of television sets is loss-bearing for the lion share of the electronics brands. Only Samsung manages to make some profit on the production and sales of TV's;
    • In 2012, Philips, a brand with a history in television-manufacturing of many decades, sold its whole television manufacturing division to the Chinese company TPV Technology;
  • Independent, unbound opticians are a dying race in The Netherlands, as they can’t win the battle against the optician stores chains, which give away:
    • Free service and repairs;
    • Free cleansing fluids for contact lenses;
    • Contact lenses at absolute bottom prices;
    • Free sunglasses;
    • Free second pairs of glasses;
    • Free frames with only the glasses to be paid for;
    • Free glasses with only the frames to be paid for;
  • Shoe stores and clothing stores are in a ‘permanent state of sales’, as their collections need to be sold ever quicker and at ever higher discounts, to win the competition with chains, like Hennes & Mauritz, C&A, Primark or Vögele;
  • Book stores all sell the same, ‘boring’ list of best-sellers: J. K. Rowling, David Baldacci and their likes, a few local heroes and some management books with ‘down-trodden’ subjects and boring advices.
    • Selexyz, a chain of book stores, whose book collection was somewhat bigger and more interesting than average, defaulted a few months ago and made a wobbly go-around with De Slegte, a chain in very cheap, slightly outdated books;
  • Audio and video stores lost the battle against the (almost) free downloads from the internet and the streamed audio and video services and vanished from the earth;
    • Free Record Shop, a chain with more than 200 stores in The Netherlands and Belgium, was the last victim in this gruesome series. Especially in The Netherlands only a minority of the shops will make a go-around. All others are closed. 
And so there are many, many more examples of store chains, which are annihilating themselves and their competition, in a battle with almost no survivors. 

You might ask: ‘So what?! What’s the problem?! Things are getting cheaper. That’s cool!’ and from your point of view, you have definitely a point.

On the other hand, there are a view setbacks from this development:
  • The independent specialty stores, that have distinctive and surprising things to sell and who ‘make a difference’ in the cities and shopping malls, are vanishing: they simply can’t carry their losses and low sales anymore. Shopping malls and city centers are getting more uniform and more boring, as every surprise has faded away;
  • Many stores and store chains hire ever younger and less qualified personnel, in order to minimalize their expenses. This causes their service to drop to intolerable levels in the process, which might lead to bad advice, dissatisfied customers and – in the worst case scenario – dangerous situations, due to unsafe usage of products by customers;
  • The quality and life expectancy of many ‘expensive’ products for sale has dropped dramatically, as these are manufactured and sold for absolute bottom prices. Household electronics and appliances with a life expectancy of more than ten years seem like dinosaurs: destined to be extinct;
  • Overly cheap products can only be manufactured under the poorest labour and safety circumstances, leading to humiliating, dehumanizing situations for millions of workers in the low-wage countries and even to massive loss of life (read the gruesome stories here, here and here);
  • The stockpiles of badly manufactured and quickly replaced products lead to ever bigger mountains of waste and plastic, which pollute the air, the environment in all country and the oceans of the world.

When local municipalities don't stop with their brainless delivery of millions of square meters in new shopping space and when the current economic crisis and the cannibalism among stores and store chains last, it is my prediction that at least 50% of stores and store chains will default within the next five years.

This prediction is - of course – based on my personal gutfeeling, but nevertheless, I expect to be right about this. The only things that can be done about this development are:
  • The amount of available shopping space should drop by at least 50% in the coming years, in order to diminish the murderous, cannibalistic competition between shops, store chains and shopping malls;
  • Store chains should try to stop their race-to-the-bottom(-price) too and they should find a means of cohabitation with their competitors: live and let live, instead of live and let die. This might sound overly utopian to you, but it’s the only way for most players in the retail industry to survive and for shopowners to earn a fair margin and thus a solid income;
  • Stores and manufacturers should focus on better-made and more energy-efficient products, with a much longer life-expectancy. This is better for the environment and – in the end - much better for the consumer. 

Finally, it is my prediction that the 'shopaholic' consumer, who is quickly bored with things and who wants to replace his cellphone and his television set once or twice a year, is a dying race too. 

Middle class people live much more frugal nowadays and they don’t want to spend their hard-earned money on products of bad quality, which harm the environment.

You could call me a dreamer, of course, but I’m convinced I am right about these developments.

Tuesday, 16 July 2013

VVD alderman and former senator Jos van Rey now suspected of money laundering, besides charges of corruption and being bribed.

In December 2012, I wrote about the Dutch VVD alderman of Roermond and ex-senator Jos van Rey (VVD is Dutch liberal-conservative party), who had gotten into serious trouble. In those days,the National Criminal Investigation Department had executed a raid on his house and that of his son, as well as on the house of local real estate tycoon Piet van Pol, acquiring their whole paper administration and all computer files.

Initially, Van Rey was suspected by the state prosecution of corruption during his stints as a local government official and of being bribed by Van Pol with money and an array of presents in kind. In spite of these suspicions of the state prosecution against Van Rey, he was backed up by many VVD-members in his province Limburg, who wanted him to run for the Roermond city council again and considered the accusations against Van Rey to be a disgrace.

Last Saturday, however, the national Dutch newspaper Telegraaf printed an additional article on this case. It stated that Van Rey has been placed under a heavier suspicion by the state prosecution. Next to the earlier charges, he is also suspected of money laundering. Here are the pertinent snips from the Telegraaf.

The former alderman of Roermond Jos van Rey (VVD) is not only suspected of corruption, but also of money laundering.

This became clear from a verdict by the Court of Law in Rotterdam in a private lawsuit, which had been filed by the son of Van Rey, according to local newspaper De Limburger. According to this verdict, also other non-disclosed persons have been under suspicion of money laundering.

In a reaction this Saturday, Van Rey’s sollicitor Gitte Stevens mentioned that she had been informed about this verdict, in which the phrase ‘money laundering’ had been used. However, she does not consider the accusations to be rock-solid at the moment. “It is insulting that the state prosecution thinks it has the monopoly on truth-finding”, according to Stevens. “As long as I am not informed about a formal accusation by the state, it is impossible to work on my defence strategy”.

Van Rey’s sollicitor Gitte Stevens is definitely right. Especially in this case, there is a very high-profile, political suspect, who runs an above-average risk of being “trialed by media”.

In such cases, the state prosecution should be as transparant as possible towards the defence, in order to let it develop its defence strategy, based on a ‘level playing field’ for information. Everybody has a right for a fair trial and nobody should be convicted by the media alone.

Nevertheless, these are very serious accusations for a formerly local and central official, who should be above any suspicion in order to do his job properly. Therefore I will follow the remainder of this case very closely.

Thursday, 11 July 2013

“She stole my job and therefore she must die!” – Apparent ‘dog eats dog’ situation in a carpet store leads to act of outrageous violence at broad daylight

On your own admission, you raised up the knife
And you brought about ending another [wo]man's life
And when it was done you just threw down the blade
While the red blood spread wider then the anger you made…

This is the second time that I start a blog with a quote from the bittersweet, sad and beautiful song ‘Murder’ by one of my all-time favorite artists, David Gilmour. Yet again, there is a sad reason for this quote.

Yesterday, a homicide took place in a carpet store in Rotterdam. One of the shop assistants, a 47 year old female, was stabbed to death with a knife at broad daylight. The suspect, a 43 year old man, was hours later captured by the police.

This morning, the news was published that this murder seemed to have an unpleasant economic component to it, although this news was partially overruled at a later hour.

The Dutch newspaper Algemeen Dagblad printed the story, of which I print the pertinent snips:

The man, who is suspected of stabbing a 47 year old woman from Schiedam to death in a carpet store, worked in this Rotterdam carpet store himself. Reputedly, the victim falsely accused the suspect of sexual intimidation, causing him to lose his job. The man would have sworn to get revenge on this woman. 

However, acquaintances of the victim stated that the suspect had been hassling the woman for a long time. According to them, the woman had been stalked by him for over a year.

The carpet shop, where both victim and suspect worked, had been in the middle of a reorganization. The woman from Schiedam would have filed the complaint against the apparent killer, hoping that she could keep her job, at the expense of this 43 year old colleague from Utrecht.

The suspect’s wife informed AD that her husband had worked in this carpet store for 24 years.”He addicted his life to the company. That he was fired, broke his heart”.

Ton’s wife stated that she tried to stop her husband in the morning, and when she couldn’t, she warned the people in the shop. “I called them and I said ‘Close down the shop. He is on his way. He has gone crazy!’. However, they didn’t listen to me".

It is not clear yet, whether this is indeed a crime out of revenge towards the woman, who ‘stole’ the suspect’s job, in order to save her own. It could also be a typical ‘crime of passion’ by a scorned lover, who became a deadly stalker in the process.

Nevertheless, the apparent economic component of this homicide case struck me this morning, when I read the news. How desperate and outraged can someone become, that he takes a knife and travels the 50 km from Utrecht to Rotterdam, in order to kill a (former) colleague in the shop where he worked for such a long time.

If this murder case has indeed been caused by the economic circumstances, as described in the early version of the AD article, it produced only losers:
  • the woman, whose ‘master plan’ to save her job apparently led to her own death;
  • the suspected killer, who wasted his future and that of his wife and children, out of feelings of revenge;
  • the carpet shop, which apparently has been tricked in unjustly firing a colleague and now lost two colleagues in the process, while becoming a crime site ‘without any commercial future whatsoever’; 

It might be a huge cliche, but this crisis gets nastier every day!

Wednesday, 3 July 2013

Will the latest trick of Rabobank, Robeco and DNB be the end of the executive bonus?! Don’t put your money on it!

I don't know how it happened 
It all took place so quick 
But all I can do is hand it to you 
And your latest trick

Robeco is a large, Dutch, Rotterdam-based wealth management company, owned by the Dutch sifi bank Rabobank. Robeco has €135 billion in invested capital, spread over shares (49%), bonds (28%), hedge funds (5%) and miscellaneous investments (18%) (source: Dutch Wikipedia).

In order to become leaner and meaner and focus on the core activities, Rabobank put Robeco ‘for sale’ in April 2012. Of the three possible buyers, the Japanese financial service provider Orix became the company that reeled in the big fish. Two days ago, on 1 juli 2013, the news was published that the sale of Robeco to Orix would be finished soon: everybody happy!

However, the story didn’t end there…

Yesterday, the word was spread that Robeco had ‘pampered’ 53 executives and key operatives with a retention bonus of in total €33 million, in order to make them stay through the takeover period. This news was an unpleasant surprise for Dutch finance minister and chairman of the Euro-group Jeroen 
Dijsselbloem, who is very much aware that the public opinion is radically against bonuses these days.

Even more unpleasant for him was the news that the Dutch national bank De Nederlandsche Bank (DNB) had approved of this bonus, due to the ´extraordinary situation´ at Robeco and the circumstance that the current staff remaining in office, was part of the sales deal for Orix.

The following snips come from Het Financieele Dagblad:

The bonus of Robeco is actually against the rules, but nevertheless De Nederlandsche Bank (DNB) approved of a one off-retention bonus for 53 executives and key operatives at Robeco.

This was disclosed in a letter from DNB to the Rabobank, from which RTL Nieuws quoted on Tuesday. This Monday, the bonus became effective through the sale of Robeco to the Japanese Orix Corporation. Rabobank was the parent company of Robeco.

In the letter, DNB writes that the bonuses were necessary to keep employees, who were of crucial importance for the company and especially the success of the sale. The operational and financial risks that emerge during the sales process, are containable this way.

Jeroen Dijsselbloem was not amused at all: he demanded the DNB executive in charge, Jan Sijbrands, to visit his Finance Ministery at the shortest possible notice and give him a thorough explanation about how this mega bonus could have happened.

Yesterday, executive director 'Supervision' Jan Sijbrand of De Nederlandsche Bank (DNB)  sparked outrage in minister Jeroen Dijsselbloem. At the shortest possible notice, the DNB executive has to justify himself at Dijsselbloem’s Finance Ministry, because he allowed wealth management company Robeco to hand out a €33 million retention bonus to 53 key employees. This was disclosed after a confidential letter of DNB, concerning the multi million euro bonus, had leaked through the televised news program ´RTL-Z´. 

Such a retention bonus violates the ´Arrangement Restrained Rewarding Policy´of DNB and the Authority Financial Markets (AFM). At the explicit request of Robeco’s parent company Rabobank, the DNB approved of this bonus.

Yesterday, Dijsselbloem called this bonus arrangement ‘a questionable decision, insensible and against the common opinion of these days’.

This seemingly firm response by Dijsselbloem was by far not enough to get the outraged labour union for the financial industry `De Unie´(i.e. the union) at ease. An infuriated chairman of De Unie, Reinier Castelein, snarled on BNR News Radio:

“I don’t understand one bit of this. The minister should ruthlessly interfere in this case. Dijsselbloem acts upon this affair, as if he is shell-shocked. These 53 people, who collect these bonuses, get away with this, when I hear Dijsselbloem talk like he did yesterday.”

Castelein called it ‘weak’ that Dijsselbloem tried to blame the bonus on his predecessor Jan Kees de Jager. “Was this the same minister who brought Cyprus to its knees and told the Russians ‘that they were on their own’? And here, they give away €33 million. That is more than enough to keep 600 to 700 laid off workers at work for one more year”.

Personally, I am frustrated by the enormous differences in income and the exuberant bonus culture within the financial industry. On top of that, I’m disgusted by the fact that these executives and key operatives of Robeco must be bought with large sums of money, like expensive prostitutes, in order to let them maintain their current position with the new owner at the helm.  And I am utterly frustrated that this €33 million in bonus money is indeed enough to keep 400-600 laid off workers at work for at least a year.

Still, I’m afraid that chairman of De Unie Reinier Castelein is right about these ’53 guys of Robeco getting away with this mega bonus’. Especially the fact that Dijsselbloem tried to put the blame on former finance minister Jan Kees de Jager, cannot conceal that Dijsselbloem has been ‘caught by surprise’ through this bonus arrangement.

Now Dijsselbloem tries to contain the damage by administering ‘speech 22a’ from his book ‘250 speeches to ease up the general opinion’ to Jan Sijbrands of DNB. Sijbrands will eat ‘humble pie’ and he will promise that this was really, really, really the last time.

Subsequently, he will tell that at this moment this deal is a rock-solid agreement between DNB and Rabobank, which must not be violated or else the DNB / state might by sued by the Rabobank. Dijsselbloem will swallow his pride and accept the deal reluctantly. One thing: Dijsselbloem himself with certainly not earn bonus points with this event…

Although the media have tried ‘to bake a nice cake’ from this story, I noticed that the public showed a luke warm reaction to this event. The people in The Netherlands were seemingly not surprised that rules, preventing against the handing out of excess bonusses, have been bent once more.

At the same time, employees lose their jobs by the thousands at that same Rabobank. Also concerning these massive lay-offs the general public has probably been softened up by the stockpile of misery that went over them in the past two years. Their modus operandi is currently: ‘everybody for themselves and God for us all’. 

Still, this case won’t do any good for repairing the relation between the ‘fat cat bankers’ and Jan Modaal (i.e. Joe the Plummer) in the Dutch Main Street. This relation is now at a sub-zero level and it will stay that way for many years to come. Nevertheless, although I hope that this has been the last episode of the long-lasting soap opera ‘Mind your Bonus”, I have many doubts about that.

In a few years, ABN Amro and SNS Bank – both Dutch state banks at the moment – get labeled ‘for sale’. The ‘lucky’ buyer will probably demand that the people in charge at key positions will ´continue at the office´ within the company. 

These people are of course more than willing to do so, provided that ‘something will be done to maintain their loyalty’: “might we suggest a small bonus, sir?”

Monday, 1 July 2013

Breaking news: Corporate investors start to develop a conscience! Will this become a trend during the next decade?

Money it's a hit
Don't give me that do goody good bullshit

It is definitely a time of depression that we are currently in.

In 2008, the global economy entered into a rollercoaster, put in motion by the default of Lehman Brothers as a consequence of ubiquitous lending and excess debt. In the end, it didn’t matter much whether it were the subprime mortgage loans which sparked this global crisis or that it had been another flawed product or wobbly financial situation.

Lehman, the very large American merchant bank, disclosed with a big bang the structural imbalances in the global economies for the eyes of world. Imbalances, that before had been looming under the surface, invisible for the unsuspecting viewer. The bank became the trigger in a global domino network, where everything was interconnected with each other and one dropping domino stone could cause a financial cataclysm.

Initially, state officials everywhere and a substantial number of macro-economists thought that the crisis could be contained by throwing numerous billions of money at it, in order to stop this runaway train and kick-start the global economies again.

However, the most important thing which happened was that the systemic risk transferred from the small and large banks and their share- and bondholders, to the local governments of individual countries and eventually to the central banks and governments of the United States, Europe and the Asian countries. 

The central banks in the world became the ‘lenders of last resort’ for structurally insolvent 'zombie'-banks, while the taxpayers became the party, which had to foot every bill.

Creditors, lenders, share- and bondholders, who had obviously taken excess risks in the past, were pulled out of misery by the lower and middle classes in all countries; all in the name of the ‘stability of the financial system’, which would otherwise become under jeopardy. Thus started one of the largest transfers of wealth in history, from the middle classes to the highest classes.

The middle classes became confronted with the consequences of their excess consumption in the previous years and their excess debt on housing, vehicles and durable consumption goods. They decided that ‘enough was enough’ for their gathering of debt.

Banks had suffered from a lack of risk awareness in the years until 2008 and since then lost large amounts of money on bad investments. They remained in an undercapitalized zombie-state, in spite of all (inter)national financial aid programs, which offered billions and billions of euro’s in rescue amounts.

Since their 'rescue', these banks continuously refused to borrow money to all small and medium enterprises, that didn’t have ironclad business plans and enough rock-hard collateral to lend money upon. Instead, the banks worked on their capitalization levels, in order to meet the solvability and liquidity demands, as set by the Basel agreements.

The situation became that consumers slowly accepted the new austerity as a fact of life and refused to buy anything beyond the necessary. Banks, at the same time, refused to lend money to companies, although these desperately needed the investments and loans to stay afloat and become healthy again. This became the end for increasing numbers of companies.

This sobering development led to a plunging consumption, dropping imports and exports, diminishing housing prices and a general drop in demand for (durable) consumption goods and vehicles all over Europe and the US. In the process, it also led to massive loss of jobs and - consequently - soaring unemployment. This development reinforced once again austerity among the populations of the western countries 

Thus, the large economic crisis became a depression: a time of enduring economic hardship, seemingly without a way out. Where in general normal recessions  only last for two or three years, the current depression lasts already for five years and the end of it is nowhere in sight yet.

Such a depression comes accompanied with general sobriety and forced frugality for the middle and lower classes. On top of that, it often causes a flow of pessimism and anger among the parts of the population, which are most hurt by the crisis. A nasty side-effect of this pessimism and anger is that it leads to general distrust between civilians, companies and government officials and mutually between people.

In such a depression, the smallest tensions between people, companies and governments could already lead to outbursts of public outrage and violence. We saw this not only happen in Greece, Spain and Turkey, but especially in the Arab world, where the ´Arab spring´ soon turned into a nasty winter with massive violence and a rising death toll everywhere. Also in the Far East tensions between groups of people or between the people and the governments ran high on more than one occasion.

Even in the ‘peace-loving’ and stable Western countries, the tolerance for human errors and dishonest behaviour has been very low during the last five years. 

It is therefore no coincidence that these years disclosed so many scandals concerning individual people, companies and governments. 

In optimistic times people don’t bother to look very hard into rumours and simmering scandals, as they don’t want to spoil their optimistic mood. 

However, in times of depression, when general tolerance runs low, people want answers when something bad or unfair happens to them. They want swindlers, dishonest policitians and fraudulent companies to be brought to justice. Any which way...

While this pessimistic and angry mood in society can be very negative and even brutal at moments, it has also a cleansing effect on all parties to whom it concerns. 

Companies, people and politicians, who became ‘Once bitten, twice shy’, often try to improve their general behavior and ways of doing business. 

Consequently, they become less prone to errors, fraud and inappropriate actions, as the eyes of the ‘angry, moral majority’ force them into better, less risky or fraudulent behaviour.

This side-effect of a depression might explain, why today one bank and a number of institutions, operating as corporate investors, announced a significant change in their investment policies:
  • The Dutch sifi bank Rabobank;
  • The  pension funds:
    • Zorg en Welzijn (i.e. Healthcare and Wellbeing);
    • PME (Metal-Electro);
    • PMT (Metal and Technique);
    •  Pensionfund for Commercial Shipping
  • The pension execution organizations PGGM and MN


The Dutch financial newspaper Het Financieel Dagblad wrote that the Dutch sifi (systemically important financial institution) bank Rabobank does not want to invest in shale gas projects anymore. Here are the pertinent snips:

Rabobank Groep does not supply loans anymore, when the money is used for the extraction and exploration of shale gas. This was stated by the bank in a statement on its corporate website.

In the article, Rabobank explains its point of view for doing business in the oil and gas industry. The cooperative bank puts environmental sustainability at the front and excludes explicitly all activities that have to do with ‘unconventional fossile fuels’, like oil and gas, extracted from tar sands and shale. 

More and more American farmers fear a lack of clean water, due to pollution coming from the extraction of shale gas.

Pensionfund Zorg & Welzijn

Today, the very large pension fund Zorg & Welzijn announced that it will put all tobacco companies on a black list, which means that the pension fund will not invest in these companies anymore. Again, the FD published this story:

This Monday, 1 July 2013, pension fund Zorg en Welzijn (PFZW) stated, that it put tobacco companies on the exclusion list for investments, with immediate effect.

PFZW tried to start a discussion with tobacco producers, about various problems concerning the production in the tobacco industry, like labour circumstances, children’s labour and the marketing and sales of tobacco products to youngsters. However, these discussions didn’t lead to improvements, according to the pension fund. 

Besides that, the pension fund points at the awkward relation between the product tobacco and the healthcare industry, in which all 2.5 million participants in the pension fund work or have worked. “The product doesn’t fit to us”, according to a spokesman of the pension fund.

All these circumstances combined, this led to an exclusion of tobacco producers as targets of investments.

PGGM and other pension funds

Today, the Dutch pension execution organizations PGGM and MN and the industry pension funds PMT, PME as well as the Pension fund for Commercial Shipping, all declared that they had put the American hypermarket chain Walmart on their blacklist for investments.

The FD wrote the following article about pension executioner PGGM, while the other names were mentioned in a similar article by the Telegraaf :

Dutch pension execution organization PGGM has sold all the Walmart shares that it held and put the American hypermarket corporation on its blacklist, according to the pension executioner in a press statement on its website this Monday.

“The immediate cause for this step is the fact that Walmart does not want to approach us in our concerns about the labour circumstances within the corporation at the domestic market, the US. Besides that, the executive management of Walmart does not stand open for a fruitful dialogue with an important shareholder of Walmart”, according to PGGM.

PGGM stated that it had many discussions with Walmart, concerning its worries about the labour circumstances  there. The hypermarket chain restricts employees in their possibilities to organize themselves in unions. “This is not only a breach of International Labour guidelines (ILO), but also of the codes that Walmart itself sets for its suppliers”.

Besides that, questions about a bribery scandal at subsidiary Walmex remained repeatedly unanswered and the pension executioner didn’t get the chance to discuss its worries directly with the executive management of Walmart itself.

Although three separate policy changes in one day, among institutions in The Netherlands, must definitely be coincidence, it is yet a tell-tale signal of the changing mood among people and companies.

Perhaps, these decisions by these institutions have all been taken out of political or business opportunism, rather than from the heart. Probably, these institutions felt forced by the ‘communio opinis’ of their grassroots and participants. Never mind, in cases like this it is the result that counts for the choices that have been made, not the motivation behind these choices.

I hope that these ‘new ethics’ will indeed become a trend for the next decade and that it will lead to companies, which are not only paying lip-service to ethical ways of doing business, but also put their money where their mouth is.

And, when the Dutch banks and pension funds are involved in such decisions, it will be a lot of money to put somewhere else. And so the current depression brings also something good.