Little red diaper babies like my late roommate Linda used to sing:
“Fly higher, and higher, and higher

On each silver wing a red star.

And every propeller is shouting 'Red Front!'

On the planes of the USSR.”

She taught me this song to show how she had been raised, with irony. Her mom, born in Hungary, stayed loyally red after 1956.

As the border battles in Ukraine pick up I keep thinking of the Red Army Chorus to which Linda belonged. But even they would not be singing now.

Russian tanks, planes, and troops are reportedly crossing the border with eastern Ukraine after the referendum there which violated the terms of the truce between Ukraine and Russia.

As is customary on these occasions, Euroland stocks are mostly down for fear of Krieg, Guerre, War. And gold is up.

The NZZ interviewed the most obscure central banker in the world, Thomas Jordan, head of the Swiss National Bank, about the pending Nov. 30 vote on central bank gold holdings. Herr Jordan said:

“This initiative is against the interests of Switzerland because it aims to fundamentally change our monetary policy.” He added that it would have fatal consequences by limiting the ability of the CB to react to upheavals to restore currency stability.

Switzerland allows petitioners to require a vote on matters which governments would rather not consider, like gold policy or emigration. If enough people sign the petition, it comes to a vote, even if it is not politically correct.

The current populist referendum would require that Swiss reserves hold 20% in physical gold and sets limits on when the CB is allowed to sell the yellow metal. Referendums are not necessarily more democratic than parliaments. In fact they often ways to pander to the right and localism, particularly in the lonesome valleys of the Alps.

Now for the news with 5 companies reporting tops and flops, and lots of bits and pieces.

German, French, Brazil, Canada, Finnish Results

*Brazil's Cosan SA had a few poor excuses for a truly rotten Q3 reported on after the market closed on Thurusday. While the sugarcane and ethylene firm saw sales up nearly 7% from prior year, every measure of profitability and margins fell horribly.

Sales hit 10.284 bn reais. but gross profits and margins fell, operating profits and margins fell more, ebitda and margins fell even further.

The bottom line was awful, with net profit at Rs 15.2 mn vs prior year's Rs 205.9 mn. That works out to a drop of 92.6%.

Now for the excuses. Harvests were hit by a drought. Sales were made from stock rather than current production, which was costly.

Then too under IFRS two more profitable parts of the CZZ conglomerate, Raizen Energia and Raizen Combustiveis were only half counted this year vs fully consolidated last.

Then too CZZ hedged $s and materials like mad, 5x the prior year levels, but it wasn't enough. CZZ also cut capital spending by over 10% y/o/y to try to stanch the bleeding.

Finally the hoped-for combo of Rumo Logistico with America Latina Logistica has been delayed causing costs to rise.

But Brazilian indiscipline didn't help. Costs (SG&A) jumped in every corner of the conglomerate and new taxes also hit. If you look at the most profitable bit of CZZ, Comgas (a cogenerator of electricity and gas) volumes were up far more than the actual booked profit. The same for lubrifiants.

Why you may well ask do we put up with this samba? One reason is that despite falling oil prices and the miracle of subsalt oil offshore Brazil, ethylene is still a big need in this large country with poor linkages. While both ethylene volume and value fell in the quarter vs last year, by 39% and 37.4%

this is a reflection of general economic malaise, and not predictive of future trends.

Another reason is the vast land bank for cane and grain that CZZ has accumulated in 5 Brazilian states.

CZZ fell 5% yesterday on Brazilian markets before the news release before crashing into double digit losses the moment the Portuguese release hit. Leaking is a soccer tricks the country is brilliant at.

Sell half despite the promise of a Rs 0.36318800979 dividend per share, which works out to $0.144870503 per ADR. The ADR, amazingly, is up fractionally today.

*What Harry Geisel calls “Steady Sampo” reported Q3 pretax profits of euros 452 mn, down 2% from last year, but it upgraded its P&C insurance forecast for the whole year because it expects the Nordic region to offset problems in other parts of the world. Notably, it also lowered its forecast of full year combined ratio (which combines investment and premium earnings) from 88-91% to 88-90%. Lower is better. In Q3 the ratio came in at 86.9% vs analysts' average expectation of 86.7% (reported toReuters.)

The poll also expected SAXPF to again up its yearly dividend to euros 1.87 this year from 1.65 last. CEO Kari Stadigh said “I want the yearly dividend to form a graphically beautiful lone with gradually rise but it is not my decision”. What he meant is that from investment returns have to grow to support his payout goals. Most recently (as we reported) the central bank of former non-Euro high payout country, Sweden, cut its yields to zero.

He added: Our internal cash flow is very strong, creating a good foundation for us being a dividend stock also in the future.”

Harry notes: “They miss by a few pennies when interest rates are so low. But the new CEO likes raising dividends. Sampo raised its annual divi every year since 2008.”

*Allianz Versicherung SE surprised on the upside, beating forecasts despite the Perils of Pimco. The full numbers will not be released until next Thursday. While introducing a new CEO, AZSEY announced that it will to pay out 50% of net profit in dividends going forward, starting this year, vs 40% before. It is now more closely aligned with other insurers like Zurich Financial, which pays out 70%.

Preliminary results show a 5.2% rise in Q3 earnings to euros 8.1 bn. In German trading the share gained 4% Heute Morgen and mostly kept it at the US opening.Morningstar raised its target price for the German share to euros 122 (putting the ADR at just below $16 and reiterated the “no-moat” rating.)

CFO Oliver Baete, due to become CEO, told the conference call he is confident that Pimco, what US investors focus on, is on track to do better after a transition period. It is unclear whether he meant in performance or in stabilizing outflows. Probably the former. In Q3 post-Gross, 93% of Pimco portfolios under management beat their benchmarks.

Baete, a former McKinsey specialist in insurance and asset management is also known for cost controls. AZSEF also revealed that it is paying special bonuses to retain talent after the Bill Gross exit.

Baete also indicated that Allianz is considering “all options” for dealing with the retail side of its US insurance arm, Fireman's Fund. He also said about 20% of future net profits will be used for acquisitions. We are now ahead of the price we paid for AZSEY ADRs (each equal to 1/10 a German share). Despite beating the Morningstar TP we are sticking with Allianz.

*Veolia Environnement reported 9-mo sales up 4.3% to euros 16.8 bn on which operating income soared 14.6% to euros 711 mn, mainly because of UK waste operations. Its adjusted cash flow rose 12.8% to eruos 1.45 bn and it expects to close the year out up ~10% based on constant exchange rates, and forecast a “significant” rise in operating and net income in this year. It expects to pay 70 eurocents per share in divi. CEO Antoine Frerot spent too much time on the CC discussing the problem of a bankrupt ferry to the French island of Corsica to give Q3 figures. VE and a French government entity, the CDC, jointly own the ferry through a jv and there will be a reshuffle of assets so VE can focus on its water and sewage business. VE debt fell to euros 8.62 bn at end Sept from 9.61 bn the year before. It hopes to end the year at ~8 bn with cost cutting to reduce its expenses by euros 750 mn.

Since we didn't own VE last year I do not have the data to extract Q3 from the 9-mo figures. Excusez-moi!

*Canada's Pure Technology, a small cap stock with software and devices to check on the integrity of water and sewage pipelines, managed to issue both 9 mo and Q3 results. Its revenues rose 13% to C$17.1 mn boosted by a major equipment sale in Mexico.

But despite lower costs of sales, off 14%, its cash flow (EBITDA) fell y/o/y to C$2.14 mn, off 22%, its operating expenses rose 37% including an acquisition. So PUR-Toronto again had a Q3 loss, C$200,000, but only a quarter as high as the year before, or 0 loony cents/sh vs minus 2 cents the year before. Other metrics were encouraging, with gross profits up 22% to C$14 mn and margins hitting 82% vs prior year's 76%.

PPEHF in the quarter acquired a former distributor, Hunter McDonnell Pipeline Services, now in a separate division for oil and gas pipeline inspection and hired people to help run it. CEO Jack Elliott forecast that Q4 would be “extremely busy” which doesn't mean in the black, but also that it would achieve its 2014 financial targets. The problem with inspection services is that projects are lumpy but several delayed in Q3 are expected to go live before the year ends.

*On a day when The Guardian and other newspaper published details of how Luxembourg helped companies like Ikea avoid taxes, aimed at embarrassing the Luxembourgeois President of the European Commission, Banco Santander won a challenge in the European Union High Court. The Euro Supremes confirmed the legality of the tax breaks SAN got from Spain for overseas earnings which the eurocrats said were too generous.

*Euroland stocks down included Nokia which is from Finland, right beside Russia and near Latvia where a border guard was snatched over into Russia. NOK is also near Norway where a submarine may or may not be lurking.

*Santander is from Spain, right beside Portugal where Russian jets may have violated air space coming in from the Atlantic. So SAN is off too despite the ruling.

Drug Trials

*Novartis was denied approval by the FDA advisory committee for LBH598, an expirimental multiple myeloma cancer drug which was ruled too dangerous. Panobinostat extended progression-free survival but caused non-cancer complications which killed 7% of patients in the trials. The full FDA normally follows the advisors' advice. NVS is down.

*Teva wil prsent 4 abstracts on its investigational multi-dose dry powder inhaler for asthma (MDPI) at the American Allergy and Asthma Meeting this weekend in Atlanta. The albuterol MDPI uses a breath-actuated dry-powder short-acting beta-agonist. The papers give the results of year-long phase 2 trials for safety and dosage in pateints aged 12 and over as part of its ANDA application with the US FDA. The breath-activation is unique. Teva is also down from yesterday, perhaps only because Tel Aviv is closed on Friday.

*Galapagos nv of Belgium, which employs our former biotech maven, has been informed by GlaxoSmithKline that GSK 2586184, a selective JAK1 inhibitor licenses from GLPYY, will not be developed for oral administration to patients with psoriasis because of the risk including interaction with statins discovered during phase II trials. However GSK is looking at other indications for the GLPGF drug.

Japan Energy Moves

*Japan is restarting the first 2 reactors shut in after Fukushima in early 2011 and this boosted Cameco's share price by ovr 10% this morning. Also it boosted my other uranium mining share, Uranerz, which operates in Wyoming. CCJ and URZ are both Canadian. It will restart nuclear power plants in Jan.

Meanwhile France continues to generate 70% of its electricity from nuclear plants scattered around the Loire Valley, even though mini-drones have been released over the area, perhaps by greens.

By 2020, the Weinberg Foundation of Britain expects nuclear electricity generation will by up 30% as emerging markets bring on new clean power plants. Yesterday Jeff Reeves (Marketwatch, Dow Jones) recommended CCJ and said it would post its best revenue numbers this year since the Japanese disaster.

*As expected the link-up pipelines to the Jordan Cove (Oregon) liquefaction and export terminal today got a US Federal Energy Regulatory Commssion's draft environmental impact satement approvals, but the FERC still has to formally give its okay after collecting public commentary.

The Veresen project will link Jordan Cove in Oregon to a 232 mile terminal to link to Ruby and Alliance pipelines, being built jointly with Williams Partners, a US LLC I own as well as FCGYF. The draft was distributed yesterday with a big headline saying “Not for Distribution or Dissemination in the US” for some mad reason, given that FERC is a US regulator.

Veresen has now completed the acquisition of 50% of the Ruby pipeline which serves the Western USA. This deal, financed by a private placement which added new shares to the stock earlier, will boost its standing in various Canadian indexes.

Most importantly, the Canadian piepline firm is reported by Reuters from Japan to be in talks with 6 firms in Japan preparing to contract to offtake LNG from the Oregon facility when it is approved and built and will designate its partners by next summer. CEO Don Althoff told the press agency in Tokyo that the LNG can be shipped to Tokyo Bay for $11/mn BTU starting in 2019. This would be 30% cheaper than gas going to Japan from Alaska or Australia.

*Chris Loew's latest small cap pick, Kubota, is up over 18% earlier besides yielding 3.8%. KUBTY. Defer, defer, to the Emperor of Japan!

*Delek fell for some reasons I wrote to Dr SF to explain:

1. Israel lacks experience in taxing and regulating oil and gas companies. Tamar is the first and it is learning the ropes.

2. Its chief shareholder, Yitzchak Tshuva, is of Arab-speaking Libyan heritage isn wants to spread the gas to Jordan, Turkish Cyprus, and across the Sinai desert to Sisi's Egypt, all of which has further political risks. If the Egyptian liquefaction plants are restarted, Tamar gas will also go to Spain and Italy. If the political situation improves, Turkey may also be an Israeli gas offtaker.

3. To raise the money needed for the next monster offshore fields, appropriately called Leviathan, DGRLY is selling or divesting part of the family crown jewls: insurance companies in the US and Europe which were owned when I called Tshuva the Israeli Warren Buffett; southestern US gas statations, convenience stores, and a refinery; other gas stations and roadside diners in Britain and France, etc.

Delek is high-risk and Tel Aviv is naturally trigger-happy over the developments. That is the primary market and US investors cannot make up for Israeli shorting. I hope for a big payoff.

As for SF's question on the impact of lower Saudi oil prices, of course there is no regional overlap between the leading Opec country and the Jewish State. In fact regional gas pricing very variable with Russia collecting high fees because it has a pipeline network feeding its customers which keeps them away from the spot market. DGRLY could not make a deal with Australia to ship gas there after the Israeli government set high export taxes

*Infosys signed a jv with Tableau Software (with the outstanding ticker symbol NYSE-DATA) which will bring on quick and easy business analytics based on “big data” to clients of the Indian IT firm, INFY.

*Abengoa's newly floated yield sub reports on Q3 Nov. 14. Not sure if the parent will also report. ABGB announced a new 20 mW hydroelectic plant in the Peruvian highlands which will supply clean power to 10,000 households by channeling the Mamacocha River between two mountain lagoons near Arequipa, using the 343 m drop between them. The plant will be run by Hidroelectrica Laguna Azul.

*Despite iron ore prices falling to a new 2014 low, Vale is up 2.8% on the expectation that smaller high-cost producers in China will be squeezed out.

*National Bank of Canada cut BCE to neutral from outperform.

*Hikma Pharma was cut two levels to neutral from buy by Goldman Sachs yesterday. HKMPY.

*Continuing the internal dispute over Agrium at Scotiabank, analyst Ben Isaacson has not posted a target price for AGU of US $120 and says its FY 2016-7 cash flow will hit $3 bn, 50% over last year's level. Comments Martin Ferera, “Isaacson has been consistent [ie bullish] while the BNS Private Advisory Group tend to be cautious because they are in the portfolio management business.”

Martin also advises that Australian plans to boost milk production to serve Chinese babies will translate into higher demand Down Under for plant food. Currently New Zealand dominates the milk business with China.

Also boosting AGU was Credit Agricole which raised it from under- to out-perform earlier. It made another new high.

Fund Notes

*Fibra Uno hit a new 52-week high in Mexico. FBASF here, FUN011 there. It is a REIT.

*Herzfeld Caribbean Basin Fund will declare a divi Nov 10 despite being in a non-transferable rights offering. CUBA