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Thursday, 31 March 2011

Information supply Fukushima Daiichi: All smoke and mirrors in the best David Copperfield style.

If you follow the news on a day-to-day basis, you wonder about the quality of the information supply for Fukushima Daiichi, the nuclear power plant in distress.

A few days after the earthquake and the tsunami, just when the problems in Fukushima had begun, you could think as a layman: this situation is all new here; it makes sense that nobody knows what exactly went wrong and what is going on now.

But today it is almost three weeks ago that the nuclear disaster started and the information supply of Tepco and the Japanese government starts to remind me of a good old-fashioned magic show of David Copperfield. It is all smoke and mirrors, as you don’t know:
-     What the situation in the reactors of Fukushima Daiichi is currently?
-     How lethal the amount of radiation is that is present there?
-     If this 15 mile safety zone (20 km) that the Japanese government is keeping up is sufficient or if it is a total laugh, endangering the people of cities and villages that live within the 30 mile zone?
-     How polluted and poisonous the ocean surrounding the nuclear reactor is and how far this polluted zone stretches?
-     How many people are now working in the danger zone and consequently are sentenced to death?
-     How lethal the fuel rods are that are used up and are lying in the “swimming pools” or what is left of it?
-     What Tepco and the Japanese government are planning to do now: covering the reactors up or not?

And that is not only a shame, but a total disgrace.

Although it is 25 years ago, I remember from the Chernobyl days that after the initial phase where the Soviets tried to cover everything up, they were quite helpful and open in sending information about the disaster (if my memory serves me well). As a matter of fact, I believe this extraordinary event helped to create the détente between Michail Gorbachev and Ronald Reagan, thus ending the cold war a few years later.

But the Japanese government and Tepco officials, after a promising start with “glasnost” (total disclosure) on the events at Fukushima, have been spreading all kinds of disinformation about the situation at Fukushima Daiichi. It might have to do with their fear for loss of face or future claims, but it is bad anyway.

I show here most of the newsflashes that were published during the last ten days (March 31 – 21) in the Financial Times alone (beware: some links refer to the subscription site of FT):

-   Plutonium in Fukushima soil

-   Tepco chief falls ill as share slide persists

-   Q&A: Changing pattern of radiation risk

-   Radioactive flood in Japan reactor tunnels

-   Tepco chief spent week secluded in office

-   New radiation fears at Japan plant

-   Radiation fears rise at Japan crisis plant

-   Safety risks were played down, says expert

-   Tepco reactor core may be breached, says nuclear agency

-   New leak fears in Japan reactor zone

-   More Japanese crew exposed to radiation

-   Tokyo, the water effect - another day, another scare

-   Japan sees progress on nuclear plant

-   More on that 100,000-year 'tail risk'

-   Japan nuclear crisis eases amid food fears

Although this is really a lot of news, in itself this is good: This is the internet age and if we don’t have news about a subject, we create it.Therefore you can expect that there will be more news available than in the days of Chernobyl.

Where it turns out bad, is when news is spread that is more like propaganda and especially when it contains blatant lies. I’ve taken out some of the most telling snips of three articles to make my point:

Safety risks were played down, says expert (
When Tokyo Electric Power’s crippled nuclear power plant was plunged into crisis two weeks ago, Masataka Shimizu, the company’s president, placed the blame squarely on Mother Nature: the 14-metre tsunami that knocked out its safety systems had, he said, been “bigger than our expectations”.
But Tepco’s expectations are now under scrutiny amid revelations that just two years ago one of the country’s senior seismologists repeatedly highlighted the possibility of a huge tsunami in the area of the Fukushima Daiichi plant, which is now spewing radioactivity into its surroundings.
At safety review meetings convened by the Nuclear and Industrial Safety Agency that were attended by Tepco officials, seismologist Yukinobu Okamura warned that research called into question the assumptions underpinning the plant’s design.

If I read this article, I do that, knowing that people often want to close their eyes for bad luck and risks with a very slim chance of occurring. Especially when it is extremely expensive or difficult to mitigate those risks. I am a software tester, so mitigation of risk is my everyday business.

But don’t give me then the blubberer’s story that “nobody could see this coming”. It is the same bullsh*t that we heard in the early days of the credit crisis from the pundits that were in charge.
TEPCO says plutonium found on quake-damaged plant grounds (
Some plutonium found in soil on the grounds of the Fukushima Daiichi nuclear power plant may have come from its earthquake-damaged reactors, but it poses no human health risk, the plant's owners reported Monday.

The element was found in soil samples taken March 21-22 from five locations around the plant, the Tokyo Electric Power Company told CNN late Monday. The company said it was equivalent to the amounts that fell on Japan following aboveground nuclear weapons tests by other countries in past decades.
"It is not a health risk to humans," the company said. But it added, "Just in case, TEPCO will increase the monitoring of the nuclear plant grounds and the surrounding environment."

What is “no human health risk” in case of plutonium. According to Wikipedia, the story that it is the most poisonous substance on earth is indeed exaggerated. However, I read more than once that a portion of 80 microgram, breathed in, gives a 100% chance of a lethal lung cancer. And as plutonium has a weight of 19.8 grams per cc, you can calculate that 80 microgram of plutonium is 0,000004 cc.

You can bet that more than this tiny, tiny amount is found on the fields and built-up areas surrounding the nuclear power plant. Everybody that saw the explosions around the nuclear power plant knows this. 

But you are right: plutonium is very heavy (20 times as heavy as water) and yes, the chance that you breath it in directly as airborne dust is very small. But would you let your children play in a field or playground contaminated with plutonium? Or would you as a farmer like to plough the fields where the plutonium is found, spreading it into the air? And then I don’t even talk of the background radiation that the plutonium spreads just by being there.

This makes this statement of Tepco a blatant lie and a very perverse one.

Japan says makes progress in nuclear crisis (
Japan saw some success in its race to avert disaster at a tsunami-damaged power plant, though minor radiation leaks underlined perils from the world's worst nuclear crisis since Chernobyl 25 years ago.
Three hundred engineers have been battling inside a danger zone to salvage the six-reactor Fukushima plant since it was hit by an earthquake and tsunami that also killed 7,653 people and left 11,746 more missing in northeast Japan.
The unprecedented multiple crisis will cost the world's third largest economy nearly $200 billion and require Japan's biggest reconstruction push since post-World War II.
It has also set back nuclear power plans the world over.
Encouragingly for Japanese transfixed on work at the Fukushima complex, the most critical reactor -- No. 3 which has highly toxic plutonium -- stabilized after fire trucks doused it for hours with hundreds of metric tons of water.

I think in ten years we will come to the conclusion that all stories about Tepco’s successes in cooling down the four reactors of Fukushima Daiichi in 2011 have all been a bunch of lies. Time will teach us probably that the only way to go with the nuclear power plant was the Chernobyl way. This is my opinion and I can’t proof it, but it is what I stand for.

Every day that the reactors are heating-up themselves and are (nearly) melting, is a day of more radiation and more pollution of the surroundings and the oceans near Fukushima Daiichi. It is impossible to cool those reactors down sufficiently and it will proof impossible to dismantle them within 30 years (like I read today). The people that are working there will die in a matter of weeks, months or maybe a few years. That is the sad truth, as far as I’m concerned.

The best thing those heroes at Fukushima can do, is putting a concrete sarcophagus around the reactors and pray that that will hold until the end of times. And put a high fence around a perimeter of 30 miles from the power plant, warning potential visitors to stay the hell away.

Tuesday, 29 March 2011

IMF report Article IV Consultation: Reforms by Dutch government must be executed in higher gear.

Yesterday a preliminary report was presented by the IMF concerning The Netherlands:  2011 Article IV Consultation: Preliminary Conclusions. This report that checks the financial and economic health of the country, had some interesting conclusions that I will share with you. Per paragraph I will add some commentary.

Normally I would show the most important parts of the report, but due to the length and the complexity of the report I will summarize the main conclusions, after the official introduction of the report. I will keep the paragraph structure of the official report, although I don’t mention every paragraph. Under the mentioned link you can of course find the report in full:

March 28, 2011

We expect growth to decelerate slightly in 2011-12. The outlook hinges critically on global developments and is unusually uncertain, but risks appear tilted downward. Bank capital buffers seem robust, but proactive measures to increase them further are advisable in light of Basel III standards. Efforts should also continue to further strengthen the regulatory framework, supervision of large international financial institutions and crisis resolution arrangements. The commitment to fiscal consolidation is welcome, but the sizable front-loading of the adjustment ought to be handled flexibly in light of the still frail recovery and in particular in case of a serious downturn in the economy. The momentum of structural reform should be restored and reinforced.

I don’t agree on the part that the capital buffers of the banks are robust. The quality of the bank assets, held by ING, Rabo, ABN AMRO and SNS Bank, is in my opinion sometimes questionable: I think of Greek, Irish, Portuguese and Spanish sovereigns and of the Commercial Real Estate portfolio’s of the Dutch banks. I.m.o. the write-offs on the CRE-portfolio of SNS of €790 mln (excluding goodwill) should act as a warning shot for the financial situation of the other banks.

Economic situation

1.The Netherlands suffered from a deep recession.The government had to intervene strongly in the financial sector. Export was a strong factor in the GDP growth of 1¾ % in 2010. Unemployment has risen only modestly, due to labor hoarding. Inflation is picking up now.

The labor hoarding that has taken place in The Netherlands might seem a good idea, as the export is now picking up steam. In my opinion it has hindered the attempts of companies to increase efficiency and to get rid of overcapacity in the production lines.

2. The banking system is more sound than two years ago, but is still fragile. Equity vs unweighted assets is still quite low. Mortgages are seen yet as being low risk in The Netherlands. Nonperforming loans remain manageable at about 3 percent of total loans. Bank profitability, though still weak, has recovered slightly. Coverage of pension funds is still moderate, due to low interest rates. Also the insurance industry has a difficult time.

It is true that the banking system is still fragile. This is caused by the fact that bank were never forced to exactly disclose what the quality of their assets is, valueing their assets “marked-to-marked”. Everybody knows that the banks hold CRE of questionable quality, sovereign bonds of the PIIGS and other assets that should be depreciated, but nobody knows exactly how much it is worth.

3. The housing and mortgage markets appear relatively stable, although vulnerabilities are rising.Although housing prices were stable during 2009 and 2010, they are declining slightly now. Housing prices are not too high compared to the fundamentals. The risk of a contraction of house prices is relatively low. Banks run little risk with mortgages, as mortgage default rates remain very low. Household debt, however, is very high with 270% of disposable income. The mortgages are extremely high compared to the value of the collateral. This is mainly caused by Mortage Interest Deductability.

I agree with the IMF that the MID caused the mortgages to be much too high, compared to the value of the houses. I don’t agree that the housing prices are not too high. If you look to Belgium and Germany, you see that housing prices are much, much lower there, compared to nearby cities in The Netherlands. Mortgage defaults are very low in The Netherlands:
-   People get stuck with residual debt for many years after a mortgage default and forced house sale.
-   Banks don’t want to write-off on their collateral, as this deteriorates their capital buffers.

4. The fiscal position deteriorated sharply in 2009, but is already improving. In 2009 the government had to deal with a deficit of 5½ percent of GDP, due to various stimulus programs. Much higher tax receipts reduced the deficit to 5¼ percent of GDP. Public debt has risen to almost 64 percent of GDP at end-2010, owing also to financial sector assistance not reflected in the deficit.

Luckily the Dutch people could act as a milch cow to keep tax income up-to-date: not only for national, but also for local authorities. Nobody in the government cares what this does for the household income of normal, middle class families/

5. Pressures from population aging complicate achievement of fiscal sustainability.The aging people of The Netherlands will increase healthcare, pension and old-age spending for the future. This, together with the financial aid to the financial sector makes the Dutch finance situation harder to sustain for the near and distant future (up to 2060)

The Netherlands has a big issue with the ageing of the Dutch people. Improved health might make it easier for people to work longer, but people that are currently in their forties have an outlook of working 5-10 years longer than people that retired 5-10 years ago. Many people will not consider this a fair deal.

7. The outlook is unusually uncertain and risks—primarily from external sources—appear tilted downwards.The sovereign debt market is a risk, due to jittery investors and also the cross-border financial exposure is risky currently. Fiscal tightening in many European countries could have a negative impact on the export of goods and services.

8. Against this background, the Netherlands must secure the recovery, mitigate lingering vulnerabilities, and address long-term sustainability issues. In the near to medium term, with euro-area monetary policy close to the limits of its ability to shore up demand, fiscal policy must strike a balance between support of economic activity and preventing budget deterioration. Longer-term policies should strengthen financial stability, ensure fiscal sustainability, and advance structural reforms to boost potential output.

In straight English: don’t tax the country’s economy to death. I totally agree with this statement.

Financial sector
9. The bank sector and especially bank capital and liquidity should be watched closely. Stress tests conducted at Dutch banks gave satisfactory results, regarding the Dutch banks being shockproof. However, equity-asset ratios are still quite low. The government should move towards less ownership/creditorship of the large Dutch banks

Everybody with a brain agreed that the stress tests were a laugh, as no bank – including the Irish banks – failed the test. Even the new stress test leaves sovereign bonds and other assets held to maturity out of scope. And the IMF contradicts itself with their statement: that the stress test showed that Dutch banks are shockproof, but need to improve their capital position. If the banks are shockproof, their equity capital / assets position is OK. Otherwise the banks are not shockproof: it is that simple. In my opinion the Dutch banks are not shockproof at all.

10. Action to mitigate housing market vulnerabilities and distortions is needed, including a gradual reduction in MID. The Dutch financial system has a heavy exposure to the housing market.As a first step it is OK to limit the maximum loan to value (LTV) ratio for new mortgages to 110 percent and require that 50 percent of new mortgages be paid off over their lifetime. However, the government must do more to lower the LTV and to increase principal repayments. The MID is too generous and distorts the housing market. Therefore it should be lowered in steps. The government should make a clear statement about it. The social and private rental market should be reformed. Housing taxes should be lowered.

My applause for the IMF: the spineless attitude of the Mark Rutte-cabinet towards the MID should be altered asap. The MID distorts the housing market in a terrible way

14. Stricter fiscal policies should only be carried through earlier, if they don’t destroy future economic growth .
Currently the Dutch government wants to carry through stricter fiscal policies earlier than previously scheduled. This could have negative consequences for short-term growth. Especially in a situation of inflation this could have negative effects. Extra European taxes/costs could pose an extra problem when a slowdown of the economy occurs, as this can have negative consequences for Dutch exports.

I agree with this: it is better to leave taxes at a stable level of even decrease them, than to put extra taxes on people and companies, to keep the inflow of money for the government and local authorities stable. Unfortunately this is probably not going to happen, as this country’s government and local authorities are addicted to taxes.

15. When the economic recovery stalls, there should not be ceiling levels to automatic stabilizers like Unemployment Benefit.
Extra retrenchments on f.i. Unemployment Benefit could bring the Dutch economy in a negative spiral. Also the government should consider to ease fiscal measures if the economy deteriorates. In this situation it would be better to increase the pension age to 67, as this improves fiscal sustainability.

I agree: people that don’t have any money left, don’t buy products and don’t save for a rainy day. This will further deteriorate the economy.

Structural reform
18. To maintain potential growth amid a stagnating population and aging pressures, the mission supports policies to encourage greater work effort and productivity.
Apart from increasing the retirement age, labor market reforms should overhaul tax and benefit systems to curtail disincentives to full-time female and elderly work. Unemployment benefits are fairly generous and discourage job search, worsening unemployment duration. Fostering research and development (R&D) expenditure, which is fairly modest, and combating traffic congestion would enhance productivity. Various estimates put the Netherlands among the countries with the highest congestion costs. Stepped-up investment in roads and railways, requiring some relaxation of strict zoning regulations, opening the transportation sector to more competition, and enhanced recourse to road pricing schemes could alleviate congestion and thus spur productivity.


In general my conclusion is that this IMF Report is not a bad report at all. However, looking at the current Cabinet Rutte, I don’t expect that much change will come from that.

This cabinet is busy:
-  Remaining friends with the wealthy people by sustaining the MID, although this totally distorts the housing market (viewpoint of VVD (liberal party))
-  Remaining friends with the poor white people  by leaving the retirement age at 65 and blocking all measures that make the Dutch economy more flexible and competitive, like the laws governing dismissal.(viewpoint of PVV (party of Geert Wilders))
-   Taxing the Dutch middle class to death with all kinds of government taxes and taxes by the local authority.

And that is a shame for everybody who truly loves The Netherlands.

Monday, 28 March 2011

An SMS from Ernst. Short Messages Service (8)

Spyker / Saab is reporting a mega loss. CEO Jan Ake Jonsson of Saab resigns

For the bulls in The Netherlands and abroad, the take-over of the Swedish car brand Saab by the small Dutch manufacturer of luxury sportscars Spyker was like a fairytail come true. The bearish people see it just like something that is too good to be true.

It seems now that the bears lead by 1-0, according to the Financial Times. Here are the most important snips of this article.
Saab Automobile is facing fresh upheaval after its chief executive said he was stepping down and the company’s owner announced plans to raise fresh capital to help keep the struggling Swedish carmaker afloat.  Victor Muller, the Dutch entrepreneur who saved Saab from bankruptcy last year, said he would take over as interim chief executive until a replacement was found for Jan Ake Jonsson, who has led the company for the past six years. Both men insisted there had been no falling out, but analysts said the loss of such an experienced executive, who had been with Saab for 40 years, was a further blow to the company as it struggles for survival.
Saab’s Amsterdam-listed parent, Spyker Cars, on Friday reported a full-year net loss of €218m on sales of €819m for 2010 after buying the Swedish carmaker from General Motors last year. Mr Muller, who controls about 35 per cent of Spyker, said Saab remained on course for profitability in 2012 and voiced frustration over the widespread scepticism about his chances of success.
“There is so much cynicism that if I say something is red, people think it must be black,” he told the Financial Times. “The only way we can prove the doubters wrong is through performance.” He said the decision to raise €13.6m (£19.2m) through the issue of new shares and the conversion of a €9.5m loan from his own investment company into equity were prudent measures to reduce debt rather than a sign of renewed financial crisis. Saab sold just under 32,000 cars last year, down from a peak of 130,000 in 2006, but Mr Muller predicted recovery as new models are introduced and consumers see “that we’re still going to be around in three years’ time”.
Victor Muller, the Dutch entrepreneur that co-founded Spyker, is a real entrepreneur in the sense that he likes to take risks and wants to achieve the impossible. Most of the time that is a true quality.

In case of his take-over of Saab, however, you should notice three things:
-     Spyker never made a profit and never managed to reach the quality standards of real supercar brands like Ferrarri, Lamborghini or Noble.
-     Saab is already hopeless for many years. In the eighties the brand was as good as dead, before it was taken over by GM. In 1995 it made a real profit on the production and sales of cars after 7 years of losses, but since then the results are often terrible.
-     The demand for more loans (among others) from Vladimir Antonov, a Russian venture capitalist of doubtful repute, sounds a lot like throwing good money at bad money.

It seems like the blind is leading the blind and we know where that usually ends. The net loss of €218 mln seems like a bad omen for the future of Saab.

Delta wants to go ahead with building a nuclear power plant in The Netherlands.

Delta, a small Dutch energy company, had well-established plans for the development of a second nuclear power plant in the Dutch city of Borssele, where already one older nuclear power plant is active. These plans were supported by a majority in Dutch politics, until the events in Fukushimi Daiichi began to unfold. The cabinet of Prime-Minister Mark Rutte is still in favor of the development of the nuclear power plant, but some political parties begin to get cold feet. Also the growing acceptance of nuclear energy by the Dutch people came to a sudden halt by the Japanese events.

Delta reacted with a marketing offensive towards the new power plant. The Financieel Dagblad reports (link in Dutch):

More leaflets and extra meetings concerning the plans for a second nuclear powerplant. Public utility-company Delta is doing damage control after nuclear disaster in Japan. 
And suddenly it was busy in Zeeland. Even the BBC and German broadcaster WDR were able to find to the small energy company Delta during the last weeks. The images of the smouldering nuclear power plant Fukushima in Japan turned the tide for nuclear energy. Therefore companies with nuclear ambitions are in the spotlights. This includes Delta that wants to develop a nuclear power plant near the Zeeland city of Borssele. 
CEO Peter Boerma of Delta understands the waning public support for nuclear energy. He kept his guard up when this subject came up and wants to keep the discussion factual. “The situation in Japan was never out-of-control, according to a report of French nuclear experts”, he states. 
Boerma says not to be worried about the waning support, but states:”We are aware that the events in Japan can have consequences for the public support”. Information supply is of paramount importance. “We will be busy doing that”. A planned leaflet concerning the existing nuclear power plant is moved forward and printed in a bigger issue. Also the efforts in parliament in The Hague are increased.

I can imagine that Delta and especially CEO Peter Boerma wants to move on with this new power plant, as this will be a strategic asset for the small energy company. But it is naïve that you can alter public opinion with just a leaflet and an extra meeting in townhall. And in public opinion nowadays nuclear energy is just as popular as a root canal treatment at the dentist.
In my opinion Delta should better wait for half a year until the final damage of Fukushima is known, instead of pushing through now. The people of Zeeland and The Netherlands otherwise won’t understand this marketing offensive.

Eneco takes over Oxxio

One of the top three energy companies in The Netherlands, Eneco, wants to take over Oxxio, Dutch subsidiary of British energy giant Centrica.  According to the Financieel Dagblad, this was a surprising move (link in Dutch). Here are some pertinent snips:

Eneco surprises with taking-over Oxxio. 
Energy company Eneco takes over price fighter Oxxio from British company Centrica. Eneco pays €72 mln to the British, that were already looking for a buyer for their subsidiary for 1.5 years. 
Market watchers call it a surprise move that precisely Eneco steps forward as a buyer for Oxxio. Eneco has very little energy-generation capacity of their own in comparison to the number of customers it services. This makes the company vulnerable. All electricity Eneco doesn’t generate itself, must be bought on the energy market. Price peaks can cause high costs of energy. The take-over of Oxxio makes this problem only more urgent. Eneco gets 426,000 extra customers by taking over Oxxio, totalling the number of customers to 2.1 mln.

Eneco must have a good reason for taking over Oxxio. I don’t mind, however: the three giants in The Netherlands Nuon, Essent and Eneco are working towards establishing an oligopoly in the Dutch energy market. For me this is a bad development. It can never be the intention of the free market to let near-monopolist companies arise. And this is exactly what the ‘three sisters’ are in The Netherlands.

Damen Shipyards increase their profits strongly

Damen Shipyards, the biggest shipbuilder in The Netherlands, saw profits increase strongly in 2010, according to the Financieel Dagblad (; no direct link present)

The company booked a profit before taxes of €140 mln. This can be read in the annual report of the shipbuilder. 
The amount of profit is much higher than in 2009 (€82 mln), which was already a good year for the shipbuilder.The result is also surprising, as CEO René Berkvens only anticipated a profit of ony €50-60 mln in May 2010, in an interview with the FD. At that time he warned of a diminishing order portfolio and price pressure. 
The strong increase of profit is attributed to efficiency improvements (i.e. cost savings).
The turnover was with €1.3 bln) a fraction higher than in 2009 (€1.23 bln). The volume of the order portfolio, €2.8 bln at the beginning of 2009, dimished to €2.1 bln.

These are good results, but not every company can pride oneself in having the Dutch queen as a marketing tool. It is also good to remember that in shipyards the difference between good results and bad results can lie in the sales of only a few ships. 

With the diminishing order portfolio the results next year might not be so good. Therefore we should hope that the queen – as always – did a wonderful job in convincing the sultan of Oman.