Global Investing newsletter

The Maltese Falcon and Turkey

Tue, 2017/10/10 - 1:54pm | Your editor

Readers had a lot of fun with my blog of yesterday, sending me notices that “the end is nigh” and commentary belittling the importance of “nudge”, Nobelist Richard Thaler's insight into behaviral economics. I misstated one thing: Prof Thaler is not necessarily going to put his money where his mouth is, into Fuller & Thaler Behavioral Small-Cap Equirty (FTHNX) and the Undiscovered Managers Behavioral Value Fund (UBVAX). Instead, he told journalists he intents to spend his Nobel prize funds “irrationally”.


Today's blog is about Turkey, Malta, the Vatican City, Israel, Bermuda, the Dutch Antilles, and a few other places.

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Economic Nobel Prize Stock Picking

Mon, 2017/10/09 - 1:31pm | Your editor

A reader who calls himself Carter and Brewer—sturdy Anglo-Saxon job names both—wants me to predict whether stock markets are toppy and ripe for a fall, or not. Should we exit shares (call that Carter) or pile in with the rest (Brewer).

Since there is no right answer I am taking refuge in the so-called Nobel Prize for Economics given today to Prof. Richard Thaler, who combines economics with psychology in helping run two small cap funds at Fuller & Thaler.

The question comes down simple either or: if an investment strategy has worked in the past, will it continue to work or will it reverse? This is the stock market version of the gambler's dilemma: do hot hands continue to win? Do cold hands lose again? In basketball or horse racing, winners tend to win more, because of the psychology of players or jockeys.

But in strict games of chance, like in Las Vegas, some punters take an alternative view: if there has been a streak of wins or losses the odds are higher that the next play will reverse the trend. If the one-armed bandit or the roulette wheel are honest and not fiddled with, the odds of a reversal and the odds of the trend continuing are identical. Red or black, odds or evens, are equally likely on the next toss or turn regardless of the past trend.

But most gamblers believe in “hot hands” and “cold hands.” Behavioral biases mean that error-prone gamblers do not realize this. Some bet on reversal and some bet on continuity based on earlier results. These miscalculations of the odds, called the “hot hands fallacy” mean the odds are better for those betting on a reversal of the trend.

Another behavioral insight is that losses are twice as worrying to investors than merely lowered gains.

In investing, the hot hands fallacy would ignore a profit warning on a stock which has done well in preceeding quarters and would overreact by dumping after profit warning from a company which warned earlier. You won't buy the index but will seek out stocks dumped in a seller's panic and short stocks that arrogant managers continue to buy and talk up.

Fuller & Thaler, which aims to gain from investors' and managers' behavioral biases, until today officially had only $61 mn in assets under management (AUM). Now it gets ~$1 mn more if Thaler puts his Nobel winnings into the pot. There is already another Nobelist economist on board, Daniel Kahneman who won the Nobel economics prize in 2002, formally called the Sveriges Riksbank Prize in Memory of Alfred Nobel, essentially for examining the hot hands fallacy.


Not enough exercise; too much chocolate cake: Nudge, nudge

Thaler's insights follow Kahneman's. Thaler's insights are contained in the Nudge (his term) strategy, government use of taxes and other policies to get people to do what is best for them long-term. Nudging means “if you want people to do something make it easy”, as Thaler said in a radio interview with The Economist a year ago. People do not make economic decisions rationally. They choose what's easiest, not what's best.

We eat unhealthily or fail to save for retirement or choose the wrong mortgage. So you “nudge” folks to automatically increase their IRA contributions if they get a raise (which worked in the UK) or collect for wildlife preservation or the collection when they enter a national park or museum. A paternalistic and benevolent government nudges by requiring that competing investment or mortgages programs be easily comparable. A nudge exposes sneaky marketing gimmicks. We don't want to think about organ donation after our death so you make that the automatic option when people renew their drivers' licenses (as in Spain.)

Prof Thaler famously commented after British voters opted to exit the European Union that “People are voting with their guts. There is no spreadsheet. This is much like a divorce without a prenup. You're voting to leave and we'll take care of the financial details later.” He also said in the same interview: “People do not act with proper understanding of risks. People attracted to Trump for example.”

But asked about financial markets Thaler avoided the question from Brewer and Carter: should you invest in the market which has fallen furthest (then Japan) or the one hitting new highs (US tech.) He took refuge in the classic example of the beauty contest, where you win if you correctly guess which woman will be selected by the most voters. The stock market is like a beauty contest, Prof Thaler replied, quoting Maynard Keynes who argued that you have to pick the woman who will appeal to the most ill-informed judges, not the one you think is prettiest.

The two mutual funds F&T runs are open-end, so we don't normally cover them: Fuller & Thaler Behavioral Small-Cap Equirty (FTHNX) and the Undiscovered Managers Behavioral Value Fund (UBVAX) which F&T recently brought back in-house after managing it on behalf of Allianz SE of Germany. AZSEY owns Pimco fund, and UBVAX was a distraction. It has about $6 bn under management solo, not counting the former Allianz fund. Fuller also runs separately managed accounts also not included in its AUM total. Unless you switch your money to one of these funds you cannot benefit from the Nobel Prize in economics.

But what you can do is avoid exchange-traded funds whose future strategy is required to copy that of the past—to invest robotically in stocks which have gone up.

More on the subject for paid subscribers below from Israel, Germany, Spain, Brazil, Britain, most African countries, Colombia, Hong Kong, Finland, Australia, Belgium, Mexico, and Canada.

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Sunday Tables Posted (with fewer controversial remarks)

Sun, 2017/10/08 - 12:12pm | Your editor

I have just posted the performance tables at where you can view the ones you are qualified to open: the closed positions table is open to anyone but only paid subscribers may view our current positions in stocks, bonds, closed-end funds, and exchange-traded funds. Join them by subscribing so you can make money with our research.

The US bond market will be closed tomorrow for [gasp] Columbus Day which my city's mayor is boycotting despite re-naming himself de Blasio. Markets will be closed in Japan, South Korea, and Canada tomorrow.

Tel Aviv will be closed the 11th and 12th for more waving of palms and dining in booths, while Brazil and Spain will be closed the 12th only. The 12th is when the telephone lines are due to be repaired in the building housing my home and office, in theory in time for me to get to the Yizkhor Memorial Service at Central Synagogue, but their sense of timing is pretty weak. And there just may be another delay. 

More for paid subscribers follows:

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Wir sollen nach Europa!

Fri, 2017/10/06 - 12:38pm | Your editor


Deutsche Bank's stock analysts weighed in with an argument for global investing, particularly in Europe, being shared with you, headlined “connect the dots”. It reads:

nvestorsd underallocated to international investment may be missing out on an important growth engine in today's global economy. While the US is home to many of the world's largest and most important companies, the international equity markets account for almost half of the world's market capitalization. By ignoring international stocks, you may be missing out on an important growth engine in today's global economy.

According to the International Monetary Fund, non-US markets made up almost a quarter of the world's gross domestic product (GNP) at the end of 2016, and accoutned for almost half the world's market capitalization.

The global economic recovery is increasingly evident in the developed markets of Europe. Until several months ago, investors worried that the region was politically risky. Now, as the dust of Brexit and the Italian and French elections settles, these concerns appear to be dissipating, allowing focus to shift to improving economic data.

Interest rates are expected to remain low, which is generally supportive of stocks. Meanwhile, consumer and business sentiment are strong, boosted by rising industrial production, credit lending, wages and employment.Europe's high-export economy continues to benefit from revoery in the emerging markets...

This translates to an ennvironment that should support continued strength across the region. Earnings growth appears to have reached an inflection point, reversing a 5-year treand of flat to negative growth. Deutche Asset Management's analysts anticipate double-digit earnings growth in Europe for the first time since 2010. And those numbers are broad-based, not limited to a few business sectors.”

Deutsche then boasts that it is very present in Europe and can closely watch on European companies. Ja.


Tactfully, it does not say that US markets are ahead of themselves after a too-long set of new highs by the broader market, the S&P 500 index, and by a small handful of attractive US tech shares.


Today, Wall Street was jolted by the weak jobs report, hit by hurricanes. UK PM Theresa May's stumbled as a speaker. European stocks are suffering in tandem, hurt also by political uncertainty in Germany (plus a deadly storm, Xavier, in its Baltic area) and worries about Spain's dealing with Catalonia. Austria has a vote on the 15th and its stocks are down. It is a good time to move into European shares.


One US stock to SELL is Verizon which, having connected my office direct line after hours a week ago, today disconnected it instead of repairing our main line corporate number. This is not just incompetence. It is because they own the copper lines which run under the streets in Manhattan, inherited from Nynex and ultimately from AT&T. I suspect they were laid in the sewers by Alexander Graham Bell. By cutting off service they are trying to force me and my neighbors to switch to their phone services from other firms, which is probably illegal. Our super, back from vacation, is taking on the cause. I just sold half my VZ. They now say they will come Oct. 9 when the building is again on lockdown for Columbus Day.

More on telcos below along with news from Europe and also Japan, Israel, Egypt, Australia, Argentina, Chile, Peru, Chile, South Africa, and Hong Kong.

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Pollyana Day

Wed, 2017/10/04 - 2:06pm | Your editor

I am not going to sing while being crucified like Monty Python, but today we have some Pollyanna notes, seeing the bright side result of bad news.

First off, the mounting list of victims whose data was stolen from Equifax by hackers, may result in the USA abandoning one of its silliest customs: using social security numbers for indentifying people. SS numbers routinely are used for verifying your identity when opening a bank, brokerage, or credit card account, to get medical treatment or hospitalization, to apply to vote or to drive.

That makes identity theft easy, something both the ex-Equifax execs and their congressional inquisitors agreed upon. Social security numbers need to be masked separately with codes created for each purpose: financial, medical, pension, or applying for something from the state or federal governments.

Another Pollyanna idea, unfortunately less likely to see the light of day. Richard Nixon, from the Republican right was able to open US relations with China more easily than his Democratic Party predecessors, who feared being called “soft on Communism.” Being a president best-regarded by voters in the heartland who live in areas where gun control is viewed as an attack on constitutional rights, Donald Trump may be the one who can add more sensible checks on the sale of rifles, handguns, and shooting irons—and particularly the horrific ease with which weapons can be modified to fire automatically to kill scores and wound hundreds. After all, Pres. Trump is a New Yorker and while he has a license to carry a gun he went through one of the country's most nit-picking license processes to get it.

Now that Secretary of State Rex Tillerson has confimred his loyalty to the President, the State Department can use his brownie points (or brown-nose ones) to shift some of the extreme White House positions toward the foreign policy mainstream.

Finally, if the tax-cut brigade can blame the likely deficit to come on natural disasters, as Pres. Trump did yesterday in Puerto Rico, we may not wind up facing and end to our ability to deduct state and local taxes from our federal income statement. Again, as a New York taxpayer, Mr. Trump has experience with this deduction, even if his tax forms are still being kept hidden. Melania Trump and their son Barron were New York City residents for most of the current year and joined by Mr Trump (with considerable costs for cops and great mayhem in our neighborhood) when he came to NYC to visit with the UN chief and host a fund-raiser at Le Cirque, both in the zip code area where he used to reside (and where I still live.)


My note yesterday about Russia filling in the gap in internet access for North Korea has been confirmed by the mainstream press. I filed earlier than they did because I got the information from what I consider reliable sources, Frankfurter Algemeine Zeitung and Foreign Affairs magazine websites. The latest news is that Putin-land is also offering other more critical economic and military help to Pyongyang from its Far Eastern border region of Primorsky Krai. This a Kremlin reaction to sanctions over its support of separatists in eastern Ukraine and Yalta.


Russia is also making nice to Nicolas Maduro which may wind up troubling the US on a different front. The rumor is that Rosneft of Russia is buying taking the US Citgo gas station chain over from the bankrupt petty dictator of Venezuela, supplier of filled tanks in our heartland, and indeed all over NYC. While we sanction Rosneft, it has taken a Citgo mortage as collateral for loans to the PDVSA sub in payment for crude oil So far Pres. Trump has excluded PDVSA and Citgo from sanctions, which cynics attribute to the Caracas-controlled oil co. having donated a half million bucks to his election campaign and continuing lobbying. However, I expect the blushing President to reverse course now and stop being a pal to Putin who may have got Trump his job.


Polyanna positivism also applies in our stock performance today, but I will only share that with paid subscribers. We have news from India, Israel, Argentina, Sweden, Britain, Russia, Brazil, Panama, Costa Rica (a first), Germany, Australia, Hong Kong, and Canada. There will be no blog Thursday and only a quickie on Friday for a Jewish holiday and then the long-awaited installation of our our land-lines.

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Funds of Funds

Tue, 2017/10/03 - 1:41pm | Your editor

If you want to lobby your elected representatives to increase gun control after the horror in Las Vegas visit to find them. And thank you to ShellyPalmer Strategic Advisors for finding this site.As a New Yorker I do not need to contact my Senators and Representatives to vote against the gun lobby, since they already do.

Our president, a rare New Yorker with “a license to carry”, needs to think about what the modern era proliferation of guns and gun deaths means to America. His remarks on the slaughter were, for him, surprisingly presidential, but they omitted the one thing every American needs to address: the absurd interpretation of the second amendment language to allow the proliferation on our streets and colleges, schools and now a hotel, of highly dangerous weapons. This isn't the 18th century any more and the weaponry is no longer just a hunting rifle.

This had nothing to do with “a well-regulated Militia” since regulation is exactly what the gun lobby increasing opposes. “The right of the people to keep and bear arms” does not mean that NY-style regulations and checks have no place in our free system. You cannot drive a car without a license or practice medicine as you wish. You also cannot become part of a militia by getting a gun without signing up.


BlackRock has acquired over 10% of the shares out of City of London Investment Group plc which runs a fund of closed-end funds to gain from their discounts from net asset value under savvy Barry Olliff. CoL sells its fund of funds, which is listed in Longon to institutional investors in the US but for regulatory reasons do not sell their funds to US retail investors. It also sells portfolio management to US institutions.Your editor watches their public placements because they often trigger buy-backs to cut the discount. Olliff started on focusing on emerging markets closed-end funds (CEFs) but now has the knowhow to also invest in developed market, notably the US and Canada.

BlackRock Inc (BLK) was recently added to its “Americas Conviction” list by Goldman Sachs and insiders have been buying. Goldman is also creating lower fee variants on exchange traded funds competing with existing ones.

Worldwide, BLK hasd $5.7 trillion under management, from individuals and institutions and has staff in over 30 countries. If offers mutual funds, exchange-traded funds, and other pooled investment vehicles as well as separate accounts for rich people and trusts.

Its presence in the US CEFs area is very lop-sided. It offers a few specialized equity CEFs for sectors (like energy or health science) or high yield via stock or bonds. These are much less profitable for the manager than exchange-traded funds for the same sectors. It also has a bunch of loan participation funds, most of them launched recently.

But its main heritage CEF business is running bond funds including many covering the municipal bond market, with single-state munis (many for New Yorkers) and national ones. So the move on Olliff's outfit may signify that BLK wants to also work on global closed end stock funds and country funds, where it is absent. BLK HQ is in my zip code, as is Trump Tower from which a nut could kill many fund managers, but it plans to move to the more fashionable Hudson Yards by 2022.

One incentive for BLK which is of course a legal fund manager is the rush of so many people to bitcoin and other pseudo-currencies. While it is not interested in money laundering it is seeking to get more foreign equity exposure.

City of London Group stock rose 1700% today, which is of course lovely for Barry Olliff, a long-time friend who founded the firm 40-odd years ago and with whom I chat when in London. I'm afraid I never thought of buying into his fund management group which is a penny stock, in part because I could not buy its open-end UK fund.


More for paid subscribers follows from Colombia, Britain, Switzerland, Israel, Thailand, Canada, Panama, Bermuda, Ecuador (a first), China, North Korea, Russia,  Brazil, Puerto Rico, Germany, Sweden, Finland, and Norway. More also on funds for paid subscribers.

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Scary October

Mon, 2017/10/02 - 3:07pm | Your editor

October is supposed to be a month of terror, because of Hallowe'en. More than pumpkins and masks, spiders and witches, broomsticks and black cats are scaring me now. The largest ever death toll from a shooting spree by Americans against other Americans took place at a country music concert in Las Vegas. The number of dead is now  58 and there are hundreds of wounded. The attack was claimed by IS but the shooter was an elderly US gambling addict.

What happens in Las Vegas should not stay in Las Vegas. The city is a tourist Mecca not only for Americans who support laws allowing “carry” for guns. I have gone to Las Vegas for everything from the wedding of a visibly pregnant British first cousin once removed to a book publishing by a German Jewish survivor from my mother's home town, from stock market investing confabs to visits to the Grand Canyon. In case you are wondering, I support the New York City ban on guns

Imagine what mayhem could have hit Catalonia if Catalans could legally own guns. In Europe, there is effective gun control which hampers the loony fringe of terrorists who have to use cars, swords, and knives to kill people. My first business partner, whom I later bought out, Bill Bonner, supports both Catalan independence (because his sister-in-law married a Catalan nationalist) and a supposed constitutional right to bear arms with little limit.


Your editor will be testing Norwegian Air Shuttle as a way to fly to London for the Christmas holiday, dragging her very large husband along with her to test the upstart airline which should be gaining from the latest move by Ryanair to diss its customers by canceling lots of flights. Like RYAAY NAS, now listed mainly in Oslo, charges for everything: baggage, seat reservation, meals. The stock is NWARF on the pinks. I will decide if it is worth buying after our trip. An alternative is EZ Jet which only flies in the European air space. The place where airlines make money is across the Atlantic. We are flying from JFK direct to Gatwick, a bit inconvenient but nothing as bad as Heathrow.


More today for paid subscribers, from Canada, Ireland, Israel, Spain, Mexico, Britain, Germany, the Dutch Antilles, Brazil, Panama, Australia, Argentia, Chile, South Africa, and Hong Kong. Remember that when the month changes stocks which flipped tend to flop and stocks which flopped tend to flip. Today's blog is very late because a backlog of phonecalls hit me.

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Sunday Tables Posted; Warning: Today's Blog May Offend Some Religious People

Sun, 2017/10/01 - 3:09pm | Your editor

Today's tables were posted later than usual because a lot of data was missing from my Barron's closed-end funds tables--not because of a grey printover error, but because the net asset values for funds which usually provide this were missing. I think it may have been because of the Jewish holiday of Yom Kippur, although it may also be related to hurricanes around the country. If it is because of the Jewish fast, which overlapped with our Sabbath this year, it suggests a way to buy closed-end funds at a greater-than-normal discount from NAV. If there is a major Jewish holiday which begins Friday night and the lock-down starts earlier you may get what is called a Metziah, a bargain. Our building was locked down starting at 3:30 pm, well before nightfall in New York City.

But it may be because of weather conditions in Miami, Florida, base of closed-end fund guru Tom Herzfeld. I've never asked Tom what his religion is and whether he is observant. The NAV of Herzfeld Caribbean Fund, which he manages, was in its usual place. But the other data his firm provides to Barron's was incomplete.

The Jewish Harvest Festival of Succoth begins on Weds. night and is observed on Thursday, both this week and next by reform Jews. The holiday is observed by eating your meals in a booth or shelter in your fields, which is what a Succah is. It also involves a ritual of shaking a palm frond along with three bits of myrtle and two of willow while holding a very sweet-smelling but inedible citrus fruit called an "etrog" in Hebrew. (I have never bought one in any other language because why would I want an inedible citrus fruit?) Orthodox people observe for 9 days, 5 of which are serious, and the kids drive everyone crazy because they usually don't go to school on the intermediate days. Meals are eaten in the booth which can be grim if it rains because the ceiling is made of open reeds, not practical outside the Land of Israel. We don't have a balcony or backyard in NYC but we did build a sukkah when we lived in D.C. and our grandchildren have ones in their suburban homes. Synagogue offer a place where you can observe the rules and dine sort of outdoors but we don't bother except during the important Thursdays.

The timing of waving the palm branch bothers me because of the Christian theory that the Last Supper was a Passover Seder. Passover is not a week after Succoth, but more like 6 months later (it varies depending on whether or not there is an extra month in the Jewish/Babylonian calendar for leap years.) So I suspect that the timing of Palm Sunday is off.

As for the leap month, it is because the Prophet Mohammed decided not to avail his calendar makers of the latest thing (over the prior 1500 years) in Middle Eastern astronomy that the Islamic calendar loses about 5 days per year. So Ramadan is so much tougher on people than Yom Kippur despite the fact that the fast only runs during daylight hours. If Ramadan falls in the summer in the heartland of Islam the day is long and the sun is very hot indeed for people who are not drinking any water.

As you can see I have now offended members of all three monotheistic religions in a matter of a few paragraphs.

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Portfolio Updates

Fri, 2017/09/29 - 2:35pm | Your editor

Portfolio updates are only for paid subscribers. There will be a Sunday update for the month of September for all of our tables posted at where you can read the ones allowed: all for current subscribers and closed positions for pre-subscribers.

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Markets in Focus

Fri, 2017/09/29 - 12:22pm | Your editor

Your editor was startled by receiving from BofA-Merrill-Lynch Global Research a “Situation Room” blog entitled “Happy New Year”. It was not in fact a greeting card for the Jewish and Muslim New Years which began last week, from the broker to Main Street America. The authors were Hans Mikkelson, Yuriy Shchukinov, and Yunyi Zhang, only one of the three, the Russian, remotely likely to be Jewish.

The blog was about US corporate bond investors hedging risk with rolling 3-mo forward forex rates—which now run into the year 2018. The dollar funding costs rose because of US corporates using the hedge. The swap market for forward dollars is also used by non-US banks as window-dressing for their year-end capitalization reports because their balance sheets are subject to regulations imposed at the end of the year. They also use the forward currency markets.

As a result single month currency hedges, which run out in 2017, are cheaper—and longer ones against euros or Japanese yen are up by 7 to 9 percentage points, annualized, a huge spike in the dollar exchange rate. This is a technical oddity which is particularly serious this year because of the likelihood of another rate hike by the Federal Reserve by the year end. Foreign investors like those banks will not gain from an expected increase in US interest rates—because they already are paying it.

The over-New Year interest rate spike also affects global investing picks. Our stompling ground is foreign stocks accessible to mostly US readers (and your US-based editor). So when the dollar is costlier against the currency of the respectable foreign markets in Europe and Japan (the ones where most American Depositary Receipts are home to) our shares go down on Wall Street. This technical move as they year comes to a close hurts our performance almost across-the-board with existing positions, and, because it is short-lived, creates a generalized buying opportunity. For the specific ideas for today, you have to become a subscriber.


Thank you to all readers who singed the petition calling for free freezes on new card applications from credit rating agencies after Equifax was hacked. Its new CEO told the world it would allow customers to open and shut credit freezes as often as they like without charge for life. The petiition only sought a single free freeze per year. Now the issue is persuading Experian and TransUnion, two other credit raters, to follow Equifax's lead.


Hacks go on. Whole Foods Market, a neighborhood purveyor whose lowered prices have lured me in since it was acquired by, suffered a credit card breach but this only affected its sites with full restaurants and “taprooms” (bars) which luckily are not in Midtown Manhattan. We do not dine at Whole Foods and the hack does not affect Amazon or the supermarkets. The store has called in cyber-security specialists and, in some places, the cops. Its last run-in with New York's finest was when its pre-packed fresh food items turned out to be short-weighted, as a result of which it lost a lot of customers. This led to the Amazon bid being accepted, and for the price cuts.

Readers in lower-rent areas of the country who dine or drink at Whole Foods should check their credit card bills carefully and use freezes if needed.


The promised repair of our phone lines yesterday did not take place. Verizon now is expected on the 9th ofn October. If you want to help things along please phone (using a land-line not a cellphone) to Verizon repair at 800 567 6789 saying that you need to speak about your subscription. Our number is 212 758 9480 and you can also say that you couldn't reach me on my direct line either. I am not giving that one out however.


Today's issue includes a new stock buy and a new stock sell. We have news from Sweden, Israel, Canada, Brazil, Denmark, Australia, Switzerland, Mexico, and Nevada.

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