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Monday, 31 January 2011

Local governments tax Dutch citizens into oblivion with their extreme addiction to money.

It is January again: a happy new year from your local government as represented by Al D. Erman, civil servant in your town..

We have had some bad luck with our investments in Icesave (Landsbanki Bank) three years ago… That costed us a number of millions…

Also Goldman Sachs sold us some shitty mortgage products they shorted themselves. It sounded like a real bargain at the time…

Besides that the ground sales to potential residents of our community are stalling, as groundprices are considered being too high. Those people don’t know what they are talking about…

The housing market is also stalling and project developers are going down by the dozen. What the hell those guys are doing anyway…

The building costs for our new city hall have increased by 240%. It was impossible to see this in advance and that alderman that was warning for it was just a jerk…

Our new, prestigious metro line is also 4 times as expensive as planned. Do you believe those contractors…

Our new industrial park suffers from vacancy of more than 25%. Can we help that we are in an economic downturn these days…

Therefore we are happy to inform you that we raised the tax percentage for real estate tax substantially. In this way we can cushion the falling housing prices and still receive more money from you…

Also the:
-        sewerage charges;
-        taxes for processing of waste;
-        land draining rates;
-        municipal and provincial surcharges for your certificates of residence, passports, ID-cards and permits
have been increased substantially

Although the oil prices on the market are lower than three years ago, we managed to keep the Dutch gasoline and diesel prices at the gas station among the highest in Europe.

And yes, we do care about our citizens, as we say: a happy citizen is a taxpaying citizen…

So shut up with your ridiculous comments about feeling like a sponge that is squeezed out for the last drop of water. We are addicted to money and we know you citizens still have some left…

Yours truly

Al D. Erman
Civil Servant

Societal acrimony in The Arab world and the oil prices

The time has come
A fact's a fact
It belongs to them
Let's give it back

Finally it seems to happen what a lot of western governments were afraid of: Societal acrimony in almost all Arab states, ranging from Morocco to Saudi Arabia. People, sometimes after 100 years of suppression, are finally fed up with the powers that be and inhabit the streets, calling for more freedom, more democracy and an end to the corruption and nepotism of their leaders.

And as always, problems in the Arab world come with a strong odour of oil.

The western world is always strongly in favour of democracy – at least when it doesn’t hurt their interests – so one would reckon that these uprisings would be America’s and Europe finest hour…  Unfortunately it isn’t, I guess.

The leaders of these Arab countries – at least the oil-laden ones – could remain in power due to all kinds of help from the western countries. Saudi-Arabia, Kuwait, Algeria, Syria, Tunisia, Morocco, Egypt and Libya all got their share of money, weapons, military power and industrial aid, ranging from oil rigs to nuclear installations.

The results of these politics are clear now:
-    The leaders and their families “looted” their countries natural resources and own an unimaginable wealth, stashed away in secret Swiss bank accounts.
o   The whole family-and-friends network of these rulers have an untouchable position and can do what they want: all resistance by the people of their countries is slashed by police, legal system, secret service and army in the most brutal way.

-    The western countries, Russia, India and China and all multinationals fight for the love of these rulers and remain looking the other way for all crimes that are committed by their “friends”, as long as the oil keeps running.

-    If a ruler doesn’t listen to the western countries anymore, he suddenly might find the 5th  fleet on his horizon. Look at the threats made to Iraq, Syria and Iran in the past.

-    The people that live in these countries are suppressed very badly and blame the west for its roll in this suppression.

-    Militant forces (often – but not necessarily – with an islamic background) become more and more powerful.
o    People that are normally separated by political background, unite for the time to fight the people in power.
o    Although religion is never the cause of the acromony, it might act as an extra spark, helping to fuel the conflict.

-    Revolutions in countries like these might mean an end to oil delivery, so the western countries, Russia and China remain silent like a mouse, except from some standard chit-chat about democracy, fair elections and human rights

The whole political situation in the Arabic world was like a boiling pressure cooker waiting for the air valve to get stuck. And now the explosion happened, litterally sparked by a person in Tunesia that set himself on fire, fed-up as he was with the government.

How this acrimony in the Arabic world will end is everybody’s guess. My opinion, however, is that this problem won’t blow over. If I would be part of the government and/or royal family in countries like Saudi-Arabia, Morocco, Syria, Jordan and Egypt, I would have packed my suitcases and kept my chopper fueled at all times, while remaining in close touch with the French government.

And the western oil delivery? Please get buckled up for a coming period of exploding oil prices, hoarded oil reserves, insecurity and nasty situations at your local gas station. I’m not advocating a panic here, but this might get a little bit nasty.

However, I will close with a positive note: what will happen in the Arab world will be a blessing in disguise after all. It might in the end help to improve the relation between the Arab and western world, as long as the west doesn’t try at all cost to remain the current rulers at their unworthy positions. The world can use a little bit more fairness and democracy and a little bit less corruption in these trying times.


Stocks of Facebook will turn into a rollercoaster ride!

We found love, oh
So don't fight it
Life is a rollercoaster
Just gotta ride it

What is it with some things in life? Smoking, drugs, partying and IPO’s of hyped funds? You know they are not good for you, but you want to try them anyway!

In April 2012 at the latest the common stock of Facebook will be brought to the official stock exchanges (IPO), so is expected in the market. Uptil that moment people are able to buy stock through Goldman Sachs. Three “buts”:
-   The minimum amount of stock to be bought is 2 million dollar
-   Buyers through GS are obliged to keep the stock until 2013
-   The stock is already 3 times overbought at the moment, so the chance you will get it before the stock is sold at the stock exchange is extremely limited.

The current value of Facebook is forecasted at 50 billion dollar and everybody is extremely enthousiastic about the stock, so this sounds like a no-brainer, right…? It doesn’t!

In The Netherlands around the year 2000, there two similar no-brainers were around:
-   The auction of UMTS claims ( Universal Mobile Telecommunications Systems) in The Netherlands and other countries in Europe.
-   The IPO of World Online in The Netherlands.

Let me explain what went wrong…

UMTS was the new standard for Mobile Telephones, which would provide you with:
-   Mobile Internet with almost unlimited speed
-   Exchanges of pictures, video and realtime “anything”

As this was at the peak of the dotcom bubble, the claim auctions were a resounding success in Great Britain and Germany were they delivered a staggering total amount of about 20 billion Euro. Even in The Netherlands the total amount of these claims was about 2.5 billion Euro.

Smart calculators (like ‘yours truly’) saw dark clouds at the horizon. Let’s do some calculation:

Total amount of mobile phone users in The Netherlands: 5,000,000(?!)
Total claim costs:  2.5 billion EUR
One-time installation costs for UMTS: (approx). 4.5 billion EUR
Annual service costs: (approx): 1 billion EUR

If we look at a timespan of five years the calculation is like this:

2.5 + 4.5 + 5 (5 yrs * 1) = 12 billion EUR / 5,000,000 (mob. Phone users) = 2400 EUR to get breakeven.

This meant that EVERY mobile phone user in The Netherlands should have paid at least 2400 EUR in 5 years to reach breakeven point. At this time no cent with UMTS is earned yet.

Did this happen? Of course it didn’t! And although the smartphones recently started a kind of hype after all, the auction of UMTS almost killed KPN, the biggest phone company in The Netherlands. The profit model was fatally flawed!

The IPO of World Online was also an extreme hype. It was an internet company that would bring broadband internet to the people. Everybody was sure it would change internet as we knew it then, with:
-      new commercial services and products;
-      new possibilities;
-      faster data connection;
-      better quality;

At the time it seemed like the goose with the golden eggs and its founder Nina Brink was the Mark Zuckerberg of The Netherlands. It was calculated at the time of the IPO that the value of stock capital was about 12,000 EUR per subscriber of World Online.

To cut a long story short: Nina Brink sold stock in advance of the IPO, people found this out and the stock fell already on the first day of the IPO to levels below the issue price, to never recover again. All people were angry with Nina Brink and she was blamed for the downfall of the stock. But was this the point?

Of course not: how on earth can you make 12,000 EUR per subscriber with internet. Also here the profit model was fatally flawed!

And that brings me to Facebook:
-   yes, it is extremely popular
-   yes, everybody is using it or talking about it.
-   yes, there are still possibilities for expansion in the world.

Bottomline is, however: how to make money with it?? And not a little bit of money, but 50-odd billion dollar of money?? To get all shareholders break-even?

These are my reasons to call this a bad stock in advance:
-   Facebook can’t make money from subscription fees, because nobody would want to pay for it and there are sufficient free competitors in the market.
-   Facebook can’t make enough money from selling information, because there is too much competion. Their product is not unique enough.
-   They can’t make enough money from selling services (mobile phones, subscriptions etc.), because the added value of Facebook is simply too low to defeat competition.
-   They can’t make enough money from selling advertisements, as a 50 billion dollar advertisement market for one product only looks like a mirage.
-    As all hypes, the hype for facebook will dissappear again behind the horizon.

It is impossible to earn this amount of stock money and that is the reason that the stock will be a rollercoaster ride: a lot of movement and crazy moments, but going down in the end. Do not tell I didn’t warn you.


Thursday, 27 January 2011

Greece and Ireland out of the Euro? Don’t put your money on it!

Last days there were some rumours among the pundits on Greece and Ireland wanting to leave the Euro.

Both would have their reasons for it.

Greece wants the drachme back and wants to devaluate it into oblivion to keep up their current “lazy” lifestyle: loads of civil servants in a lifelong service with the government, almost no taxes and retirement at 55.

Ireland would like to leave the Euro to be able to repay their banking and mortgage debts by also devaluating the Irish Pound into oblivion.

Two different reasons in two different countries, but for both the same recipe: leaving the Euro.

I can image that this sounds like a good solution among the American and Anglo-Saxon Eurobashers and the “average Joe and Nikos in-the-street”.

But in reality: how logical is it to do it?? In my opinion it is NOT logical at all.

Both countries suffer already from a sh*tload of debt and miserable opportunities to repay this debt. That is indeed a big problem, that asks for a vigorous solution

When you think of leaving the Euro, however, it is not like you put a sign on the wall:

"Welcome ΔΡΑΓΜΕ. No Euro’s allowed”
-    Old / new Greek money must be printed on the printing presses where now Euro’s are printed. In amounts that are beyond recognition
-    There must be change points everywhere were Euro’s can be changed for drachmes
-    All ATM’s need to be changed again,
-    All cash registers and pin machines need also to be changed
-    All pricetags in the shops need to be changed.
-    All pricelists, menu’s and advertisements need to be changed
-    All import- and export contracts needs to be renegotiated.
-    The Greek population needs to be re-educated in the value (of lack thereof) of the drachme.

At the same time there is no country to help you and support you and act as a sounding board for you. Besides that, nobody wants to have you around with your “vintage” money: everybody knows that in a short time the Drachme won’t be worth the paper it is printed on. At the same time the logistical nightmare is the worst in Greece with its thousands of islands.

And do you really think the tourists will show a happy smile, when they have to purchase drachmes again?? The tourists, that are one of the few sources of income in Greece? The tourist that are all too happy to go to Turkey for an all-inclusive treat??

Although the problems for Ireland might be a little bit less pressing, due to the geographical and economical characteristics, the logistical nightmare is the same there.

So don’t count on some country leaving the Euro. What can you count on, probably? Here are some suggestions:

- Greece and Ireland renegotiating the terms of the European loans they receive, asking for a lot less interest to pay

- Greece and Ireland writing off or even defaulting on sovereign bonds

- Greece and Ireland giving foreign banks and other European countries “the finger” on repaying their debt. Look carefully at Iceland trying to do so currently after the Landsbanki scandal.

Don’t say I didn’t warn you!


Think of the consequences:

Tuesday, 25 January 2011

Was saving the banks a good investment for the Dutch government?

In 2008, after Lehman Brothers went down, the financial crisis also broke out in The Nether­lands. In fact there were a number of dangerous situations looming within the large Dutch banks that came to an acute crisis:
ING, the largest Dutch bank and one of the Top 20 banks in the world was heavily overleveraged with a debt to equity ratio of 70:1 and substantial investments in the Alt-A and Subprime mortgages that ignited this crisis in the first place.
Fortis, when taking over ABN AMRO in 2007, together with Royal Bank of Scotland (RBS) and Banco Santander, tried to take a much bigger bite than they could chew. The blowback came in 2008: Fortis tried in vain to convince their savers and shareholders that they were well-capitalized while everybody and their sister knew that they weren’t.
ABN AMRO suffered in the last years before 2008 as a result of the drama with Banco Antonveneta. The initially failed and later “successful” take-over of the Italian bank turned the formerly solid Dutch bank into a big prey for Fortis, RBS and Santander. With 75 billion EUR this would be one of the biggest take-overs in history.
SNS and AEGON didn’t have so many acute problems, but were merely victims of the overall financial instability. Rabobank was – as the only large bank - seemingly untouched by the problems on the financial markets.
When “Lehman” happened, Wouter Bos, the Dutch Finance Minister came to the rescue: he first offered a EUR 10 billion government loan to ING and afterwards bought for EUR 22 billion of assets (mortgages) from the bank at a price of at least 15%  above market value (35% might be a better estimation: who will know?).
He nationalized Fortis and ABN AMRO and decided that these banks would have to merge together, with ABN AMRO in the roll of overtaking bank: the hunted suddenly became the hunter.  SNS Bank and Aegon were pushed to accept government aid in order to remain well financed.
The result: all banks survived and seem to prosper again, the ING remained the biggest Dutch bank and ABN AMRO became the name of the ABN / Fortis combination, which is now a “healthy” bank. All’s well when it ends well?
Let’s take a look at the facts: about EUR 50 billion in government aid is paid to the Dutch banks. This is EUR 3000 per man, woman and child in The Netherlands, which is a substantial financial burden. And what did we get for it:
·    The direct government loans will probably be returned by the banks in the near future. Aegon and ING already paid back some of the loans against a “healthy” interest. This seems to be a quite reasonable investment.
·    The EUR 22 billion of mortgages that were bought from ING seem to be a very bad investment. The chance that these mortgages, which were bought at about 90% of nominal value, will return more than 55-60% of nominal value is not very big. This means a loss of EUR 7-8 billion: EUR 500 per Dutch citizen. It might even be more as the market for these kind of mortgages is still locked tight.
·    ABN AMRO received about EUR 20 billion in government aid when it was nationalized, but will at best return about EUR 10 billion if it is brought to the stock exchange in 2014. This is again another loss of EUR 750 per Dutch citizen.
 There is also an ethical component in this question. Did these banks deserve to be saved? And are these the best banks in handling the interests of the Dutch savers and tax payers? Kees de Kort, the macro economist of BNR radio in The Netherlands and one of the brightest economists I know, says this about it:
“It is true that you need to have banks in your country. But should it be these banks?? I seriously doubt that”
ING did enable some changes in the organization of the Bank. The Bank and Insurance company that were never very successful working together are now going to be separated. I expect this might be considered a success in the near future. But for the rest the bank still acts like a supertanker, the captain of it trying to avoid a collision by frantically pulling the steering wheel and on the other hand forcing a smile on his face to reassure the rest of the crew. I don’t buy that kind of optimism, so the collision might come sometime in the future.
Main problem: the assets on the balance. What they are and what they are worth, nobody knows. Bad American mortgages, sovereign bonds from the PIIGS-countries, Dutch mortgages and loans that were handed out too optimistically? One thing is sure: these assets are not worth the amount they are booked for currently and they probably are not enough to pay off all bank debt, leaving the Dutch and European taxpayer in jeopardy.
ABN AMRO, this bank is currently led by former Dutch finance minister Gerrit Zalm. Does a good minister make a good banker? We will find out, but I have my doubts. Facts are that the bank is still in a merger with Fortis and nobody seems to know what the status of that process is. Uncertainty under personnel is still high and the balance sheet of the bank over 2009 still looks extremely weak, with real equity being only 2,5% of all assets. Absolutely no Basel III material.
Rabobank, Aegon and SNS are not doing bad at all, but Rabobank still has the burden of too many Dutch mortgages against too high Dutch housing prices: in the end something´s got to give and when this happens (see my other articles) the assets of the bank might be worth a lot less.  
For me personally it would have been an interesting experiment when the following would have happened with ING: the government takes over the bank and declares all shares and bonds being “worthless”. The key parts of the bank – savings and loans and normal banking activities – are separated from the investment bank activities and are being put in a new, healthy bank which is (temporary) run by true banking experts (old bankers in the best sense of the word). The unhealthy parts, however, are liquidized on behalf of the share and bond holders. This is a painful operation for the equity holders, but less expensive for tax payers. The same could have happened with ABN AMRO.
Instead the taxpayers now foot the bill, while nobody knows how high it will be. I don´t like that idea.

Tuesday, 18 January 2011

Steve Jobs and Apple both victims of the Cult of Personality

I sell the things you need to be
I’m the smiling face on your tv
I exploit you, still you love me
I tell you one and one makes three
I’m the cult of personality
Living Colour – The Cult of Personality

Albert Heijn, Alfred Heineken en Steve Jobs: three of the most famous entrepreneurs known in The Netherlands and hugely succesful businessmen. Two Dutch guys and one American.

Albert Heijn, took the “Albert Heyn” grocery stores that were established by his grandfather in The Netherlands and changed them into the multibillion dollar holding company Ahold with several chains of supermarkets that operate in the USA and Europe. Stop & Shop,  Martins and Giant are wellknown labels in the US eastern states and Hypermove, ICA and AH are established names in Europe. During Albert Heijn’s period as CEO of the Ahold group the turnover multiplied by 600 times(!).

The beer brand Heineken was founded in 1864 by the grandfather of Alfred “Freddy” Heineken. Freddy Heineken took the midsized Dutch beer brand and pushed it into the Top 5 of best selling beers in the world, in its heydays only smaller than Anheuser-Busch breweries. His instinctive knowledge of marketing and sales was legendary, as well as his humorous commercials and advertisements in The Netherlands.

Steve Jobs started a small computer company in 1976 and turned it in less than 35 years in a company with 43 billion dollar turnover, based on revolutionary products (i-Pod, i-Phone, iPad and MacBook) and revolutionary marketing concepts (i-Tunes, AppStores). The Apple company is so famous that its followers almost have a religious devotion to the brand and queue up in front of the Apple stores at midnight to be the first to have a new product.

There is, however, one big difference between Freddy Heineken and Albert Heijn on one hand and Steve Jobs on the other: the success of their successors.

After Freddy Heineken retired in 1989, the beer brand called after him remained succesful and while the period of double growth figures is maybe over, the brand remains steady in the top 5 of beer brands in the world.

Ahold went through some difficult periods after Albert Heijn retired in 1989, mainly due to bad top management, creative bookkeeping and bad investments, but eventually the company returned to their success formula. Albert Heijn, although until his death in 2011 very much involved in his company (from a distance), never considered to come back as a CEO.

Apple Inc. is in this case a different story. That has to do with the personality and charisma of the chairman: Apple Inc. is almost synonymous with Steve Jobs and vice versa. After Jobs left the company in 1985, Apple Inc. came into a free fall that almost led to bankruptcy in 1997. The company could only be saved by the return of Steve Jobs in 1997 and a capital injection from Microsoft.

Steve Jobs since 1997 connected one marketing success with another and turned Apple Inc. into the “brand of the decade” (according to AdWeek).

But the charisma and sheer brillance of Steve Jobs has some significant disadvantages, as could be seen at the end of 2008 and again today.

Steve Jobs has been seriously ill and left the company from January until June 2009 to be treated for a rare form of pancrean cancer. Already in October, 2008 there were rumours concerning Steve Jobs health and this resulted in stock prices plummeting afterwards. Although the company had with Q1, 2009 the best non-holiday quarter in history, the stock prices returned only to pre-October levels when Jobs reentered the company in June, 2009. After his return the stock prices skyrocketed again.

Today once again, Steve Jobs called in sick with serious health issues, appointing Tim Cook as a (temporary) successor. The stock prices plummeted between 5-10% this morning (January 18, GMT +1).

You could conclude that Steve Jobs and Apple Inc. are both victims of the Cult of Personality: Apple without Jobs is just another electronics firm with fierce competition in all markets where they operate, but with Jobs it is a company with divine status and an unbeatable track record.

Admitted: the man is a marketing and gizmo genius and the unique quality and look-and-feel of Apple's products is second to none. However, does that mean that the company without the man is worth billions of dollars less?? We’ll find out in the coming weeks.

What can Apple learn from the famous Dutch CEO’s Heineken and Albert Heijn? Three things:
-   a good CEO is extremely hard to find;
-   a brilliant CEO is even harder to find and it might just be impossible;
-   but on the other hand… NOBODY is irreplaceable, as long as you not try to replace the person himself.

You could say that you can judge a company by the quality of the CEO’s successors. In that way the future of Apple looks bleak nowadays. It might look brighter one year from now, when the company will now start seriously looking for a successor for Steve Jobs.

In the meantime all Apple shareholders should hope and pray for a safe return of Steve Jobs in the not-to-distant future.


Wanna know the truth about the economy? Just look at the “roadsigns”!!!

Compared to the United States and some other European countries, like Ireland, England, Greece, Belgium and Hungary where political unrest, societal acrimony and violent protests are increasing in number and intensity, the Netherlands look like a beacon of peace and quiet. Although our current government promised EUR 18 billion in cutbacks for the coming 4 years and tax pressure will be rising as always, the average Joe in the street (in this case called “Jan”) doesn’t seem to care. The credit crisis almost seems to be finished in the eyes of the Dutch, seemingly without leaving its marks and scars on Dutch society, as if it didn’t even start overhere. But did the credit crisis really finish indeed in The Netherlands? It’s hard to believe…

Unfortunately a lot of official data on the state of the economy overhere is incomplete, coloured or otherwise unreliable.

-       The official unemployment figures for instance exclude:
o    Freelancers that don’t have an assignment, but have no right to Unemployment Benefit
o    People that received Parttime Unemployment Benefit (special government measure: instead of being fired, these people receive a substantial part of their salary from the government for about a year and remain at their company)
o    partially handicapped people that don’t have a job;
o    people younger than 65 that are forced to be retired
o    people that live from other kinds of community benefits.

If these people are counted into the unemployment figures, the number of unemployed is rather 15% than 5%. Those are recession-like figures

-    Data on income, consumption, savings and purchasing power (a very popular concept in The Netherlands) can be hard to analyze as they may be subject to subjective accounting/measurement methods, inflation/deflation, changes in the buildup of the population and other influences.

-    Figures on the Dutch housing market are in my opinion coloured. It didn’t implode (yet), as I predicted in April 2009 , but housing prices have been in a slow-but-steady glide, while the housing market remains totally locked-up in the meantime. The current situation remains virtually unaltered as houseowners, government, banking world and interest groups (realtors and the houseowner association) are scared sh*tless for the consequences of negative price action and therefore fail to take necessary decisions: lowering houseprices, write-offs on bad mortgages and getting rid of the mortgage deductibility tax break. In the meantime everybody is hoping and praying for good news.

But what ARE figures that tell you something on the state of the economy in The Netherlands without being coloured for political or strategic reasons? Maybe we should just have a look at the “roadsigns”: what the streets, roads and highways are trying to tell us when we look at them.

The Netherlands is a very densely populated country with many commuters that depends heavily on domestic consumption and export of goods to our neighbouring countries (especially Germany). The lion share of all transport is still done by trucks, as graph 1 shows (underlying data, unless indicated otherwise, courtesy of the Central Bureau of Statistics in The Netherlands). Therefore looking at the roads and highways may give some useful information on the state of the economy

Graph 1, Transport of goods within The Netherlands, measured in Metric Tons
The graph shows that after the implosion of the dotcom bubble in 2002 and the countermeasures of the FED and European Central Bank (ECB) the domestic road transport went through a period of wild growth, probably caused by consumption of surplus value on homes due to extremely low interest rates and further introduction of Just-In-Time-Delivery within the logistics business.

There was also a steady increase in the number of cars on the road and initially the average number of driven kilometers per car, as shown in graph 2

Graph 2, Number of passenger cars in The Netherlands vs the average driven kilometers per car per year

The combination of increased road transport and passenger traffic lead to roads and highways that were constantly overcrowded, as shown in graph 3:

Graph 3, Annual aggregated Traffic Jams measured in 1000 kilometers (about 650 miles) . Copyright:

After the beginning of the credit crisis (in The Netherlands mid-2008), however, one could notice a clear decrease of the number of trucks on the road. Less visible but probably even more important is the substantial decrease of the average number of driven kilometers per car since 2005. As a consequence there has been a dramatic decrease of the number and length of traffic jams in 2009, that is not at all compensated in 2010.

Looking at the transport growth figures over the last three years (see graph 4), it shows clears why the highways were less crowded, with especially 2009 being a disastrous year.

Graph 4, Transport growth as a percentage 2008 – 2010

Some other signs you can see from the road are signs that point out:  “For Rent” and “For Sale”. After implementation of the ‘dot com’-countermeasures of FED and ECB, there has been a building frenzy in The Netherlands, especially for offices and company buildings. Reason for this were:
-         low interest-rates;
-         the “booming” economy;
-         creation of new, heavy subsidized office zones by municipalities
-         the fact that it is often cheaper for a company to develop new offices, than to change existing ones
-         an attitude of: the sky is the limit.

Office buildings that became vacant, remained vacant for long times and although the vacancy percentage (see graph 5) decreased strongly between 2005 and 2007, the credit crisis gave it the ultimate headshot.  The fact that the vacancy rate remained quite stable for the last three years is caused by the fact that new building project have been stopped/withdrawn by companies or municipalities and large project developers and contractors had to fight for their existance, cause by a lack of new orders.

Graph 5. Vacancy in houses and  commercial buildings in The Netherlands (Copyright: Jones Lang Lasalle Real estate)

                    Company Building

To give you an impression of these vacancies:

-         Amsterdam Zuidoost (southeast corner of Amsterdam), a very large office area were many financials have their headoffices, suffers from a 23% vacancy rate of office buildings. 80% of the vacancy in this area is considered structural

-         Amsterdam Zuidas (The “Manhattan” of Amsterdam) suffers from a 15% vacancy rate

-         Rotterdam Weena  (Prestigious area in downtown Rotterdam) suffers from more than 25% vacancy.

                                                               Office building in Amsterdam, for rent for already 3 years

There isn’t any indication whatsoever that the vacancy situation in the large office zones will improve in the coming years. It is the job of realtors to always remain positive, but the writing is literally on the wall. The situation in some of these office areas is so desperate that the only feasible solutions are demolition or rebuilding to living accomodation of office buildings. As a result of these possible actions the destruction of capital will be enormous and this will result in substantial write-offs for the banks that financed these buildings.

Of course is the predictive value of these figures on traffic, transport and vacancies very limited for the coming years. But you can say: if the pundits tell you that the economy is fine and growing, but the traffic density, transport data and vacancy of office space tell you otherwise, there is room for reasonable doubt