Posts Tagged ‘emerging markets’

Jeremy Grantham: Playing with fire, but stocks could race to old highs

Jeremy Grantham: Playing with fire, but stocks could race to old highs

Boy (7-9) holding sparkler, side view, night

Courtesy of Prieur du Plessis at Investment Postcards from Cape Town 

Jeremy Grantham has become a familiar and very popular face on this site. For those treasuring his insight, wisdom and prescient calls, the co-founder and chief investment strategist of Boston-based GMO has just published the April edition of his quarterly newsletter entitled “Playing with Fire (A Possible Race to the Old Highs)”.

Here are a few excerpts from Grantham’s newsletter.

“So what do I think will happen? That’s easy: I don’t know. We have been spoiled in the last 10 years with many near certainties – mainly that real bubbles would break – but this is definitely not one of them. Not yet anyway.  (However, I am still willing to play guessing games despite the fact that “I don’t know.” So here, as Exhibit 1, is my probability tree.)

“The general conclusion is that the line of least resistance is a market move in the next 18 months or so back to the old highs, say, 1500 to 1600 on the S&P, accompanied by an equivalent gain in most risk measures, followed once again by a very dangerous break. If that happens, rates will still be low and thus difficult to use as a jump starter, the financial system will still be fragile, and the piggybank will be more or less empty. It is remarkably silly for the Fed to allow, even encourage, this flight path. It is also remarkably silly for investors to be so carefree, given their recent experiences. Fortunately, there are several less likely outcomes that collectively,…
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WILL EMERGING MARKETS LEAD THE MARKET LOWER?

WILL EMERGING MARKETS LEAD THE MARKET LOWER?

Courtesy of The Pragmatic Capitalist 

MIT professor Simon Johnson says the next big down leg in the bear market will come from emerging markets:


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Free Money Thursday – 130 S&P New Highs Can’t Be Wrong!

130 S&P 500 companies hit 52-week highs yesterday.

Things must be even better than I thought in yesterday's post and there has been a conga line of pom-pom waving analysts on GE/CNBC this morning telling us how UNDER valued everything is because we just don't see the BIG PICTURE.  As Bespoke notes in their chart of the S&P and it's new highs, you want to see more and more stocks hitting new highs to sustain a rally but my question is – with the market now at 17-month highs and making new highs every day – what's up with the other 370 stocks? 

In an ordinary market, I wouldn't question it but this is not an ordinary market.  52 weeks ago we were at 666 on the S&P and stocks were making DECADE lows.  Here we are with the index up almost 80% off that bottom and we can't pull a lousy 52-week high from 2/3 of the index???  We'll be keeping an eye on this indicator to see how things pan out but notice when the market fell – there were no doubts, 80% of the stocks made 52-week lows last fall – not THAT'S a sell-off.  That's the kind of dramatic numbers you expect to see in a dramatic market move – not this wimpy 40% stuff – let's see some conviction people!

AAPL is convicted – they are up 191% from their lows and AAPL is 15% of the Nasdaq so, all by themselves, AAPL has accounted for 28% of the Nasdaq's move from 1,265 to 2,389 (89%).  TRV is also moving with conviction, up 54% since March and adding 160 much-needed points to the Dow, a great swap for C, who would have only added about 24 had they remained in the index.  CSCO replaced GM (because they are soooooo similar) and they too have been a great trade for the Dow, up 100% off the March lows and slapping 104 bonus points on the index. 

Ah, now we see how our industrials can do so well despite all the unemployment and lower cap utilization and lack of demand and high commodity input costs – we just shuffle the deck until we find a set of cards that work!   Even so, as I've pointed out this week, the Dow has been lagging the Nasdaq
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GURU OUTLOOK: FELIX ZULAUF & THE SECULAR BEAR MARKET

GURU OUTLOOK: FELIX ZULAUF & THE SECULAR BEAR MARKET

Courtesy of The Pragmatic Capitalist

guruThis week’s Guru Outlook brings us the brilliance of Felix Zulauf.  Zulauf is the founder of Zulauf Asset Management based in Switzerland and is well known for his appearances in Barron’s annual roundtable.   Zulauf has nailed the secular bear market downturn and 2009 upturn about as well as anyone.  More importantly, he has been nearly flawless in connecting the dots in the macro picture.  From the de-leveraging cycle that led to the downturn to the government stimulus that led to the upturn – Zulauf has been remarkably prescient.

At the 2008 roundtable Zulauf recommended investors purchase gold and short stocks due to concerns with the consumer.  He remained bearish throughout the year.  At the 2009 roundtable Zulauf said stocks would bottom at some point in the second quarter after making a new 2009 low.  He got aggressive and said stocks would rally after that.  His recommendations to purchase oil, gold and emerging markets were home runs.

Zulauf’s macro outlook hasn’t changed all that much.  He still believes the de-leveraging bear market cycle is with us and that we’re in the early stages.  Zulauf sees a number of similarities with Japan and says the consumer is in the process of long-term balance sheet repair:

“we are in the early stages of a deleveraging process, which is marked by a shift from maximizing profits to minimizing debt. It is a multiyear process. The U.S. consumer is in bad shape, and the U.K. consumer is even worse.”

But Zulauf hasn’t turned bearish in the short-term yet.  He says the markets have another 10% of upside before concerns over the end of the stimulus begin to weigh on the markets:

“Central bankers themselves are somewhat afraid of what they have been doing. Politicians are worried about public-sector debt. Therefore, the authorities will try to step away slowly from their stimulation efforts, because this policy isn’t sustainable. That’s the risk for the markets.  The U.S. stock market has enough momentum to rise another 10% or so. But the authorities will start leaning the other way as they see signs of economic growth in the first two quarters, and possibly a jump in inflation. That could push the market down.”


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PRUDENTIAL’S 2010 MARKET OUTLOOK

PRUDENTIAL’S 2010 MARKET OUTLOOK

Courtesy of The Pragmatic Capitalist

Businessman gazing into crystal ball

Strategists at Prudential are among the most bullish on Wall Street (for more very bullish outlooks please see RBC’s outlook, Merrill’s outlook & JP Morgan’s outlook).   They see further government stimulus, low interest rates and the inventory rebuild driving the S&P up to 1,350 by the end of 2010 for a full 23% rally from current prices.

They believe inflation is likely to remain low as slack in the economy, high unemployment and low capacity utilization keep prices under wraps.

They remain very bullish on equity markets for 5 primary reasons:

1) GDP rebound sustaining in Q4 and into 2010, and growth expectations being revised higher.

2) Q3 earnings surprising on the upside outlook and earnings recovering further in Q4 and 2010 with solid GDP growth, widening margins and improved pricing power.

3) Inflation moving from disinflation to low inflation with excess capacity and high unemployment.

4) Global central banks holding interest rates at crisis lows levels, long-term rates remaining low, and plenty of liquidity.

5) Continued stabilization in financial market conditions and risk appetite improving further.

How to play it?  They want to be overweight stocks and underweight bonds.  More specifically, they prefer emerging market and UK equities with a modest overweight in the Eurozone while being underweight Japan and the U.S.

In terms of sectors they prefer energy, info. tech, and materials with a modest overweight in financials and industrials.  They are neutral consumer discretionary with modest underweights in consumers staples and healthcare.  They underweight utilities and telecomm.

In the bond market they like emerging markets and Japanese debt with a modest overweight in UK debt.  They are neutral on the Eurozone and underweight US debt.

The tend is much the same in terms of forex.  They like the Euro and emerging market currencies, remain neutral on sterling & Yen with an underweight on the dollar.

Source: Prudential

 


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A Conversation with John

A Conversation with John

Courtesy of John Mauldin at Thoughts from the Frontline

Unemployment Positives

Michael Faraday (1791-

This morning’s unemployment number, though still down by 11,000, is the best we have seen in a very long time. The birth/death ratio only added 30,000 jobs, and previous months were revised upwards. Given that the ADP employment number on Wednesday was so high, and the service ISM was not good, this comes as a very pleasant and positive surprise. Is this a trend, or something seasonal because the main driver was temporary jobs? We will see in a few months. Let’s hope we see a real turnaround soon.

A Conversation with John

With Damien Hoffman of Wall St. Cheat Sheet

John Mauldin coined the incredibly popular phrase, "Muddle Through Economy." If the next few years continue to drag along as we rebuild from the greatest credit bubble in history, then John’s term may become the catch phrase used by every financial journalist and economist in the land.

John is a passionate traveler with business partners all over the world. He also puts out a free newsletter to over one million people worldwide. This reach of friends and travels give John an excellent macro view of the world economy. Further, his multidisciplinary interests offer some unique insights into economics and human behavior.

I had a chance to catch up with John and talk about his experiences as an economist, his perspective on which countries will grow the fastest in the coming decades, how he sees demographics affecting the world, and a bonus question from one of our 1400 Twitter followers …

Damien Hoffman: John, was economics part of your schooling or a passion of yours right from the start?

Rear view of Monks praying in front of a sculpture, Kanari Cave, Mumbai, Maharashtra, India

John: I had a triple major in college, one of them being economics and history. So I’ve always been fascinated by history, economics, and finance. The markets are a big puzzle to me and I’m a puzzle addict. So it feeds my addiction. I started reading the Austrian economists first, in the early ’80s as I entered the investment world. That was my real introduction to economics. Over time, if you stay around long enough and read enough, you can pick up all the other schools of thought, like I did.

Damien: Based on some of your newsletters,
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Dubai’s Spruce Goose Island Ventures

Dubai’s Spruce Goose Island Ventures

Courtesy of Adam Sharp at Bearish News

Dubai’s man-made islands are stunning technological achievements. But they may end up being the poster-children for this era’s reckless real estate ventures. These projects are turning out to play a big role in the ongoing debt crisis in Dubai.

Here’s “The World” island project:

dubai-world-islands

And here’s one of the three palm tree islands, where you can see construction underway:

dubai-palm-island

I remember being struck by the scale of the project while watching a Discovery Channel documentary. What a cool concept. Unfortunately, it looks like reality is catching up to this pipe dream.

Recent revelations show that the islands’ parent company, Nakheel PJSC, is in trouble. Their attempt to delay debt payments sparked a global selloff on 11/27. Fears of a debt crisis in Dubai spreading to other emerging markets (EM) roiled stocks.

Investors collectively paused the day after Thanksgiving, “Wait a sec… I thought emerging markets were going to be the engine driving us out of this mess… Now their bubbles are popping? Uhhh-Ohhh.”

Bloomberg provides a detailed example of island building gone-wrong:

Samsung C&T Corp., builder of the world’s tallest tower in Dubai, said it stopped work on a $350 million bridge in the city after a unit of Dubai World halted payments.

Construction of the half-finished bridge, to the man-made Palm Jebel Ali island, was suspended earlier this month after Nakheel PJSC made no payments for about two months, Cho Keun Ho, a spokesman for the Seoul-based builder, said today. Calls to Nakheel’s spokeswoman Anna McGovern went unanswered.

Not all emerging markets have the same debt issues Dubai does, of course. But there are tons of risky investments lurking out there, and they’re not just in EM (hint – many are hidden off US bank’s balance sheets).

Some are speculating that Dubai’s debt problems will be a catalyst, sparking major selloffs worldwide, particularly in EM. If so, I would think those countries with stronger balance sheets, like China, will fare better than those with high debt loads. That said, I am considering reducing my personal EM holdings, but haven’t done so yet.


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After Dubai, Is Greece Next?

After Dubai, Is Greece Next?

Courtesy of Joe Weisenthal at Clusterstock

Harbor of Skiathos

After you’ve gotten your Dubai fill, take a break and check out the situation in Greece.

Here’s the Telegraph from earlier this week:

When the European Central Bank’s Jean-Claude Trichet said last week that certain sinners on the edges of the eurozone were "very close to losing their credibility", everybody knew he meant Greece.

The interest spread between 10-year Greek bonds and German bunds has jumped to 178 basis points. Greek debt has decoupled from Italian debt. Athens can no longer hide behind others in EMU’s soft South.

"As far as the bond vigilantes are concerned, the Bat-Signal is up for Greece," said Francesco Garzarelli in a Goldman Sachs client note, Tremors at the EMU Periphery.

The newly-elected Hellenic Socialists (PASOK) of George Papandreou confess that the budget deficit will be more than 12pc of GDP this year, four times the original claim of the last lot. After campaigning on extra spending, it will have to do the exact opposite. "We need to save the country from bankruptcy," he said.

Good luck. Communist-led shipyard workers have already clashed violently with police. Some 200 anarchists were arrested in Athens last week after they torched streets of cars in a tear gas battle.

Read the whole thing >

 


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China is now on the same bubble path as Japan post-1987 crash

China is now on the same bubble path as Japan post-1987 crash

James Packer's 'City Of Dreams' Casino Opens In Macau

Courtesy of Credit Writedowns

This article by Peter Tasker, a well-regarded financial analyst in Asia, comes via the Financial Times (hat tip Marshall). He sees an enormous bubble forming in China – and parallels to Japan circa 1987:

Emerging markets, it seems, have had a good crisis. In contrast to the debt-ridden G7 economies, they have quickly resumed their growth trajectory. No surprise, then, that US emerging market mutual funds are experiencing record inflows. The stellar performance of the Brics markets – Brazil, Russia, Indian and China – is due to continue into the distant future.

Such is the narrative now forming among investors. To anyone who has lived through the rise and fall of the Japanese bubble economy, it should set off alarm bells.

Remember that it was in the years following the 1987 "Black Monday" crash that Japanese assets went from being expensive to absurdly overvalued and the Nikkei’s dizzy rise to 39,000 forced the bears to throw in the towel…

But what you saw was decidedly not what you got. The crisis, far from leaving Japan unscathed, exacerbated its structural problems and laid the groundwork for a far greater disaster…

Interest rates have been far too low for far too long. If the natural interest rate is, as the Swedish economist Knut Wicksell posited, around the level of nominal GDP growth, then China’s interest rates should have been close to 10 per cent for most of this decade. Alan Greenspan, former chief of the US Federal Reserve, has been criticised for holding interest rates too low and setting off a housing and credit bubble in the US. But if US monetary policy was wrong for the US, it was even more wrong for the high-growth countries that "imported" it. The result could only be a massive misallocation of capital…

At the 2008 peak, the price-to-book ratio of the Shanghai stock exchange was over seven times, well above the five times achieved by Japanese stocks in 1989. After the turbulence of the past 18 months, the ratio has fallen to 3.3 times, still the world’s second highest after India, and residential real estate trades at multiples of income that make the US housing boom look tame…

What is scary is that the current frothiness of emerging markets,


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WSJ – Small Investors Pile into Emerging Markets, Junk Bonds, and Commodities

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WSJ – Small Investors Pile into Emerging Markets, Junk Bonds, and Commodities

crowded trade, lemmings, small investorsPosted by TraderMark at Fund My Mutual Fund

If you’ve been around these markets for a while you generally know by the time the retail investor is piling into a group, chasing huge scores – it’s generally time to run away (at the least) and for the 5% among us who short, begin to think seriously about betting against the small fry. It sounds cold, but this is just the way it tends to work … trust me, I used to be one of these people, so I learned the hard (read: expensive) way. As we read the piece below let us trust in the fact that none of these people were buying in early March, but most likely jumped in when it was "safe" a month or so later.

Contrast the lemmings running into "what’s hot" with what you’ve been reading here – about a month ago I was saying commodities is crowded and I would not want to be exposed highly there. People who heeded that thought process avoided the sand blasting that has gone on for 3 weeks running in this sector. While I do like these emerging markets for the long term, I think they are vulnerable here as well; some are beginning to roll over – Russia has already been in a "technical" bear market (down over 20% from peak). And I am saying the same thing I said in commodities a month ago, now for the latest darling – technology. It is crowded – everyone is hiding there. Beware.

I don’t really talk much bonds but while junk bonds (highest risk) has provided the most juice the past 3-4 months, its basically been a parallel to the stock market. The ‘worst of breed’ has run up the most as green shoots flower across the world. Just as with the green shoots themselves, I find the junk bond love way premature. This economy is stalled and I expect many more companies to suffer – so buying bonds of the worst seems not such a great intermediate term strategy. I’d be more interested


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Phil's Favorites

Facebook begins to shift from being a free and open platform into a responsible public utility

 

Facebook begins to shift from being a free and open platform into a responsible public utility

Facebook CEO Mark Zuckerberg prepares to testify on Capitol Hill. AP Photo/Andrew Harnik

Courtesy of Anjana Susarla, Michigan State University

When Facebook recently removed several accounts for trying to influence the 2018 midterm elections, it was the company’s latest move acknowledging the ...



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Zero Hedge

Death Of A Nation: Drug Overdose Deaths Jump To Record 72,000 Last Year

Courtesy of ZeroHedge. View original post here.

The Centers for Disease Control (CDC) estimates drug overdose deaths based on a current flow of mortality data from the National Vital Statistics System has just reached a record of 71,568 Americans in 2017. That is a 6.6 percent jump in overdose deaths over 2016 and represents a rapid deterioration of America’s inner core: The middle class.

More than 40,000 Americans...



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Digital Currencies

Bitcoin's rollercoaster ride reflects the biggest issue facing cryptocurrencies: regulation

 

Bitcoin's rollercoaster ride reflects the biggest issue facing cryptocurrencies: regulation

Shutterstock

Courtesy of Brian Lucey, Trinity College Dublin and Shaen Corbet, Dublin City University

The rollercoaster of cryptocurrency pricing is on the downward slope again. Bitcoin has fallen by a quarter in the past month, with other...



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ValueWalk

The Top 10 Wildest Campaigns Of 2018: Starboard's Stake In Symantec

By ActivistInsight. Originally published at ValueWalk.

This week’s column is a continuation of our 10 “wildest campaigns” of 2018. Find the first part here.

Q2 hedge fund letters, conference, scoops etc

Free-Photos / PixabayTop 10 Wildest Campaigns Of 2018

5. How often does an activist win a proxy contest without support from either of the two main proxy advisory firms? (...



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Kimble Charting Solutions

Small Caps attempting 20-year breakout, says Joe Friday

Courtesy of Chris Kimble.

CLICK ON CHART TO ENLARGE

The Russell 2000 trend remains solidly higher, as it has created a series of higher lows and higher highs inside of rising channel (1) over the past 25-years.

Small caps have been an upside leader in 2018, as they are very near all-time highs.

We applied Fibonacci extension levels to the 2007 highs and 2009 lows at each (2).

Joe Friday Just The Facts Ma’am- Small caps are attempting a dual breakout at (3). 

This is a price point that small-cap bulls would LOVE to see strength and a breakout take place, as monthly momentum is lofty.

...

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Insider Scoop

Walmart Posts Standout Quarter, But Raymond James Downgrades On Flipkart Costs

Courtesy of Benzinga.

Related WMT 10 Biggest Price Target Changes For Friday Headlights On Deere: Mixed Results As Company Cites H...

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Biotech

Nanomedicine could revolutionise the way we treat TB. Here's how

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

 

Nanomedicine could revolutionise the way we treat TB. Here's how

Nanomedicine could scupper the need for TB patients to take multiple daily tablets with toxic side effects. Daniel Irungu/EPA

Courtesy of Sarah D'Souza, University of the Western Cape and Admire Dube, University of the Western Cape

Tuberculosis is one of the world’s ...



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Chart School

Bitcoin Update - 6000 is support

Courtesy of Read the Ticker.

Demand shows it hand at support levels, well it obvious that $6000 BTCUSD is support so far.

More from RTT Tv , Ref: Brazil bitcoin currency , Brazil New Accounts
 


 

Main Chart in video



 

Sure fundamentals...



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Members' Corner

There Are 3 Main Theories That Explain Trump's Approach to Putin and Russia-Which One Makes the Most Sense?

What do you think?

Thom Hartmann suggests that the "Manchurian Candidate theory" is the least likely explanation for Trump's pro-Russia behavior in "There Are 3 Main Theories That Explain Trump’s Approach to Putin and Russia—Which One Makes the Most Sense?" (below).  disagrees and suggests that Putin probably has "the goods" on Trump in "Trump’s Plot Against America". (To be fair, Hartmann acknowledges that his three theories are not mutually exclusive.) Jonathan Chait argues ...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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