Since three readers sent me the following note I guess I'd better react to it. Matt O'Brien wrote Wednesday in Follow@ObsoleteDogma about research by Emmanuel Saez of UC Berkeley and Gabriel Zucman of the London School of Economics:

“Once upon a time, the American economy worked for everybody, and even the middle class got richer. But this story has only been a fairy tale for almost 30 years now. The new, harsh reality is that the bottom 90% of households are poorer today than they were in 1987.

“This is actually a much more dramatic statement than it sounds. While the Federal Reserve has already told us that the median households is worth less now than it was in 1989 -- that's the household right in the middle -- it turns out that everybody but the richest 10% of Americans are worst off. That includes the poor, the entire middle class, and even what we would consider much of the upper class.

“This troubling finding [is] based on data from Saez- Zucman's new paper on U.S. wealth inequality, based on tax data. Inflation-adjusted net worth from 1945 indexed to 100, [shows] that the bottom 90% actually did very well during the first decades of the postwar period -- adding more wealth, in percentage terms, than those at the top.

“But these days of shared prosperity have come to an end, gradually and then suddenly. It started in the 1980s when the top 1% awoke from their long postwar slumber, thanks to the combination of lower taxes, financial deregulation, and new technology. It wasn't a total disaster for the bottom 90%. Even as most Americans saved much less, accumulating far less wealth, stock markets and housing prices continued to rise. Until they didn't, coming crash down in 2007-2008.

“The problem was that middle class doesn't own that much in stocks, but went into debt to buy lots of housing. So the housing crash turned their biggest financial asset into an albatross, wiping out their equity but not their debt. And the housing recovery hasn't done much to fix this, since it's struggled to move beyond the 'nascent' stage.

“Stocks, meanwhile, collapsed during the crisis, but came back soon after. The middle class, in other words, missed out on the big bull market in stocks, but not on the even bigger bear one in housing.

“That's why the recovery has restored so little of the wealth that the recession destroyed. The bottom 90% kept losing net worth the past few years, in large part due to rising student loan debt."

Lost 25 Years

“It's been a lost 25 years for the bottom 90%, but a lost 15 [years] for the next 9% too. Altogether, the bottom 99% are worth less today than they were in 1998.

“This isn't a story about the top 1% running away from everybody else. It's a story about the top 0.01% doing so. Since 1980, the top 0.01 percent's piece of the wealth pie has increased by 8.6 percentage points, while the next 0.09 percent's has done so by 5.4. The bottom 99%, meanwhile, have seen their wealth share fall an astonishing 18 percentage points.

“A bit of historical perspective: the top 1% now own over 41% of all the wealth in the country. That's the most since 1939, although still well below the all-time high of 51% in 1928.”

One reader says: “There's a lot wrong with our country when not only are 90% worse off but also 48% of our entire national wealth is held by 1% of the population. We may even be in that 1% but this situation is not a good inheritance to leave to our children.”

He suggests a few measures:

“Start off by eliminating the capital gains tax break on 'carried interest.' The Romneys have no money at risk for their 20% cut of private equity fund profits.

“Both sides of the Hill have been bought by the billionaires. Obama proposed repeal in 2009 and got nowhere despite a Democrat majority in both Houses.

“Next put billionaires in jail when they violate the law, e.g. Steven A. Cohen of SAC.

“No I am not a lefty. I am totally middle of the road and fed up with our corrupt society.”

I think we should vote 'nay' on some corporate proxies which provide excessive compensation for their brass. If the Swiss can stop golden handshakes and Alpine-size golden parachutes, surely we can too. I am a certified liberal Republican of the Rockefeller persuasion, if poorer. But like my reader we made money with the 1% in recent years by being in the stock market, and because we both are old enough to already own mortgage free homes.

***

Sunday is going to be a big news day. There will be results from elections in Ukraine and Brazil. And the European Central Bank will publish the results of the latest bank stress tests.

Some recent polls show Aécio Neves pulling ahead of Pres. Dilma Rousseff prior to a TV debate tonight. Others show Rousseff in the lead. Brazilian polling is primitive and in the first round the tallies failed to show Neves's gains over Marina Silves.

Put Another Nickel in the Nickelodeon

• Vale is up 4.4% in São Paulo today. This despite a collapse in the price of nickel, into which it is investing heavily. VALE in Q3 is expected to show a 16% rise in nickel output, bringing YTD production to 201,400 metric tonnes, unfortunately adding to glut from Chinese output and that of Le Nickel of New Caledonia.

• Also up is Cosan (CZZ) despite new US corn husk- and cob-sourced cellulosic ethanol pushing down prices, up 3%. Ethanol prices have fallen by 1/3 to under $2/gallon.

• However, Abengoa (ABGB), a Spanish renewables firm, is down on concern about oversupply of cellulosic ethanol. It opened its latest $300 mn plant in Hugoton, Kansas, to eventually produce 25 mn gallons of ethanol/yr. ABGB depends on being able to match oil prices with its renewables, and oil prices are falling.

BlackRock Copying Us

• Nokia reported to Finnish stock market authorities that BlackRock Inc directly and indirectly owns over 5% of its shares, mostly common stock and 0.21% via NOK convertible bonds. We own NOK non-convertible bonds, the 5 3/8% of Sept 5, 2019, cusip 654902AB1, and NOK common ADRs. BlackRock is run from 5 blocks west of my office, further from Bellevue Hospital where the first NYC Ebola patient is being treated.

We reported on NOK Q3 earnings yesterday, with its NSN networks sub showing serious gains in sales and profits thanks to China Mobile 4G and other deals.

• Microsoft meanwhile has the former smartphone “tar baby” Nokia sold earlier this year. Smartphones sell well, but they just don't produce profits. MSFT is cutting 18,000 more jobs, 12,500 among former Nokians.

ValueAct Copying Us

• ValueAct Capital Mgmt of San Francisco today disclosed to the SEC holding 5.7% of the common shares of Agrium (AGU). It did not tell the US stock market regulator why it bought AGU, which rose over 8% in Toronto and 7.25% on the NYSE. There are plenty of arbitraging opportunities across the 64:40 border between the US and Calgary, Alberta where Agrium is HQ'd. AGU reports on its Q3 earnings Nov. 3 after the close. Then on Nov. 4 at 11:30 EST the brass will talk hold a conference call. Agrium also plans a Nov. 5 Investor Day in Toronto which will be replayable on its site.

Unlike most Canadian potash producers, AGU sells other plant nutrients as well, and has a retail presence in South America and Australia (offsetting North American seasonality.)

• While we parachuted out of Bombardier we are still involved in its business jet business, which is facing problems along with the rest of BDRAF. Oligarchs are cutting back on their perquisites in the USA (because of shareholders); in Russia (because of sanctions); and in Asia (because of corruption investigations.)

CAE announced today that it will offer simulator pilot training for BDRAF Global Express planes in Morristown, NJ which will enable them to get certification from Canada, the FAA of the US, and Brazil, the markets it is aiming for. CAE also offers Global Express flight training in Texas, Europe, and Dubai.

Flu Fears

• The Financial Times thinks GlaxoSmithKline's plan to partially spin out ViiV, its controlled AIDS drug consortium, indicates that the operation is financially successful. This is not from Lex, the FT's frequently error-prone gossip column, but from a new video service. GSK added to its links with Five Prime (FPRX) in respiratory diseases work on two more discovery platforms which will cost it $193.8 mn if they pan out. Bristol Myers (BMY - a US holding of mine) also partners with FivePrime, in oncology.

With GSK vaccine production under a new czar, it turns out that flu jab production for this year's inoculation is behind schedule, particularly for juvenile inoculations, according to the US Center for Disease Control. Its Quebec, Canada plant turned out vaccine with microbial contamination which had to be discarded.

While panic about Ebola is high, flu can kill up to 49,000 North Americans in a single season.

Oi Oi Oi!

Seekingalpha.com published a signed paper on Oi and Portugal Telecom by a writer called Ferdinando Garcia. However, Senhor Garcia thinks that PT's loan to Rio Forte was to its own sub. He frankly writes: “PT has failed to achieve credit protection for its subsidiary Rioforte which borrowed $1.2 bn from PT in the past.” This is poor reporting even compared to seekingalpha.com standards. The loan was to a sub of the former Banco Espirito Santo of Portugal which was a totally separate entity from PT.

Aie de mim! (Portuguese for oi oi oi!) If Senhor Garcia had done better research his piece might stimulate others to buy PT at 60% of its book value and 6x current earnings, just as Altice, an expansionary European telephony firm, is seeking to buy PT. Senhor Garcia also thinks Oi might want to sell PT's forest of telephone towers in Portugal. The Lisbon bolsa authorities have prohibited short selling of PT, which was copied by London (but not NY.) Garcia concludes “if nobody is allowed to sell they may be tempted to buy.”

Fund Notes

• Fibra Uno reported its Q3 results. FBASF revenues rose 90% y/o/y to NMP 2.02 bn but net operating margins fell by 15.5 percentage points to just under 80%. The result was that margins on funds from operations fell further, by 21.8%. However, Fibra Uno nonetheless upped its dividend by 5 cents to 49.76 centavo/sh, a rise of 10.6% y/o/y. As a REIT it can distribute (as it did) 98.6% of its income which includes foreign exchange gains and earned interest. It also included 600 mn pesos of “fair value adjustment," a red flag to me.

By law it has to distribute 95% of net annual taxable income, but it added some icing to the cake. It also uses borrowing to boost its ability to invest, and pays the interest (low of course) before calculating its NAV.

Its cash flow from investment this Q3 at negative NMP 28.5 bn was much above the negative NMP 15.6 bn a year ago.

FBASF claims that the main reason for the margin drop was extraordinary non-recurring expenses and that rental income is up 86.4% sequentially thanks to new leases and new holdings, and fewer vacancies. It said maintenance expenses on its properties rose 38.6% sequentially while interest costs fell 13..3% sequentially.

The REIT closed Q3 with a tad under half its revenues from retail properties; 32% from factories; and 19% from offices. While rail occupancy rate is 94.8% and factories 95.8%, offices are harder to rent, and are only 87.2% let (based on square footage of signed contracts.) Industrial property monthly rents per sq meter rose 12.5% y/o/y while those for retail and offices rose 4.2% and 2.3% resp.

Fibra Uno is growing very rapidly by investing in more properties and boosting its rent rolls while also issuing new shares.

Next year expiring leases will triple to 12% of the total portfolio. Next year maturing debt will account for 18.4% of the total owed. These factors can work either way depending on how good things look for the Mexican economy. With new private sector finds of oil and gas in Mexico's Gulf of Mexico waters and continued reform of its system, we remain optimistic.

However if we hadn't halved our stake in FBASF earlier this year I would do so now.

• Canadian General Investments declared a 12 loony cents dividend payable Dec. 15 to shareholders of record Nov. 28. CGIRF is a closed-end fund investing in Canada. It distributes capital gains which are not subject to Canadian withholding tax.