02/06/06: President Bush's $2.7 Trillion Dollar Budget Is On The Hill
SUSIE GHARIB President Bush sent to Congress today a $2.7
trillion budget that calls for big tax cuts and increases in spending on
defense. His 2007 budget plan leaves the U.S. government deeply in the
red, despite cuts in Medicare and other programs. Washington bureau chief
Darren Gersh has details.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: It may never
make a nationwide best-seller list, but the president`s budget always
touches off a fierce debate over what is fact and what is fiction. The
administration says its 2007 spending outline meets the nation`s
priorities.
JOSHUA BOLTEN, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET: Today I am
presenting on the president`s behalf a budget that keeps the economy strong
and restrains spending.
GERSH: Here are the administration`s facts. The budget restrains
spending by slowing the growth of Medicare by $36 billion over five years
and cuts non-defense discretionary spending next year by $2.2 billion,
keeps the economy strong by extending the tax cuts through the year 2011 at
a cost of $120 billion. At the same time, the budget expands tax
incentives for health savings accounts and health insurance by $52 billion
over five years. Budget analysts say that`s only half the story and that`s
where the fiction comes in.
ROBERT BIXBY, EXECUTIVE DIRECTOR, CONCORD COALITION: When you look at
the bottom line that they`re putting out, it`s important then to look at
the assumptions. And I think there are some very unrealistic assumptions
there that would probably keep the deficit much higher than the
administration is showing.
GERSH: For example, the administration assumes the war in Iraq and
Afghanistan will cost $50 billion in fiscal year 2007 and then drop to zero
the following year. The administration`s budget also assumes no change in
the alternative minimum tax. More and more middle class families are
caught up in the AMT, a system originally designed to snare the very
wealthy. A permanent fix would cost $1 trillion.
BIXBY: It might surprise people, but the budget numbers actually
assume a very large back door tax increase.
GERSH: Overall, the administration says the budget will keep the
economy strong, which in turn keeps the deficit under control. Again,
critics say, that`s only part of the story.
SEN. KENT CONRAD, (D) NORTH DAKOTA: The thing that is getting lost in
this conversation is what`s happening to the debt in our country. The debt
is skyrocketing.
GERSH: The Bush administration estimates debt held by the public will
grow by $1.2 trillion over the next five years, just as the baby boomers
begin to retire. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright
(c) 2005 Community Television Foundation of South Florida,
Inc. ALL RIGHTS RESERVED. Terms of use.
02/06/06: One On One With James Quigley, CEO, Deloitte Touche USA
SUSIE GHARIB: Accounting practices and ethics issues are back in the news as
the trial of Enron`s two top former executives continues this week in
Houston. To get a sense of how corporate America, as well as the big four
accounting firms are faring these days, I talked today with Deloitte`s CEO
James Quigley. He told me that American businesses have entered a new era
of accountability.
JAMES QUIGLEY, CEO, DELOITTE & TOUCHE USA: This notion of the age of
accountability is a hope on my part that that`s how we will one day look
back on these days and judge them. And I think when we look back on the
`90s, the words that most of us have come to mind are greed, entitlement
and rationalization. And I`m hoping when we look back on these days, we
will say this is a new age of accountability, the way businesses and
business leaders have behaved.
GHARIB: Mr. Quigley, Deloitte audits hundreds of companies. You sit
on the boards of many companies. What still worries you most when it comes
to accountability issues?
QUIGLEY: Well, we`re just absorbing the changes that the new
regulatory regime has put in place and change is hard. But we`re making
real progress and so I`m very optimistic about the environment that I find
today in the audit committee room. Audit committees are better informed
and they are performing their roles in a much better fashion than they did
before.
GHARIB: How reliable are financial reports these days?
QUIGLEY: Well, I believe we`ve made real progress by -- in reducing
the risk of fraud in financial reporting. And the way that we`ve done that
is through a whole broad range of components of the Sarbanes-Oxley Act, not
any individual provision, but rather the whistle blowing procedures, more
effective audit committees, stronger relationship between the auditor and
the audit committee and the internal control reporting under Section 404.
All of those contribute to a stronger financial reporting environment and
the risk of fraud in financial reporting being reduced.
GHARIB: Over these last five years, yes, we have seen Congress pass
laws like Sarbanes-Oxley, forcing companies to be more accountable. We`ve
seen CEOs being sentenced to jail time, but do you think that business
executives still think in order to be successful you have to -- it`s OK to
break the rules as long as you don`t get caught?
QUIGLEY: I know that that`s an attitude that has pervaded business,
but I believe the tone today is different and managers no longer believe
there`s a huge reward for financial engineering and they believe success
will be rewarded the old-fashioned way: producing cash flow.
GHARIB: What would you say is the most dramatic change in the
accounting industry since this wave of corporate scandals?
QUIGLEY: The single biggest change today is the external reporting on
internal control. We`ve talked about it for 25 years, but now it`s a part
of the law and that changes very, very significantly the magnitude and the
nature of the work that we perform as we complete an audit on any one of
our public companies.
GHARIB: At Deloitte, what would you say is the most dramatic change
that you`ve made, so that you can catch accounting gimmicks perhaps used by
companies that you audit?
QUIGLEY: We`ve put in place a very, very aggressive approach to client
continuance and client acceptance standards. So we evaluate risk and
evaluate their financial statements to identify if there`s any indications
of some fraud or some -- something that we simply can`t understand that
will influence whether we`re even willing to accept the client.
GHARIB: What`s different about what you`re doing today than perhaps
five, 10 years ago?
QUIGLEY: We`ve worked very, very hard on our training. We`ve worked
very, very hard on actually the kinds of people that we recruit and the
kinds of clients that we will accept, because to really strengthen your
process it`s all about the clients. It`s about the people and it`s about
the processes that you follow.
GHARIB: Do you think that investors have fully regained confidence in
American business?
QUIGLEY: There was a Gallup survey that was done by the AICPA that
indicated that the accounting profession`s image is back to where it was
pre-scandal. I was delighted with that. However there certainly is and
continues to be a degree of distrust with corporate executives, I think in
part linked to all of the visibility around executive compensation.
GHARIB: So what else do you think needs to be done to restore
confidence in American business?
QUIGLEY: I think we have to stay on the path we`re on. And I don`t
believe it`s time to amend Sarbanes-Oxley. I believe we have to continue
to absorb these changes and continue to push for the accountability and the
transparency that is part of how we`re doing business today.
GHARIB: Mr. Quigley, thank you very much; we appreciate your views.
QUIGLEY: Thank you very much, Susie.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
2/06/06: Getting Real About Commercial Real Estate As An Investment Option
SUSIE GHARIB: Rising mortgage rates and talk of a housing bubble have scared
away many people from considering real estate as an investment. Many
strategists say that`s a mistake and that property should be a part of any
well diversified investor`s portfolio. Scott Gurvey reports.
SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: While the torrid
pace of price appreciation in the market for homes is expected to slow this
year, the commercial real estate market is in turnaround mode.
DENNIS YESKEY, DIRECTOR, REAL ESTATE CAPITAL MARKETS, DELOITTE
CONSULTING: The most interesting thing is our fundamentals for the last
four years have been declining. Vacancies have been going up, rents have
been going down. The end of last year beginning of this, it`s turned
around. The fundamentals are getting better. So if the economy keeps
coming along in most categories, it looks like that would do very well for
commercial real estate. The rents will go up, slowly and vacancies will
decrease.
GURVEY: Many financial planners now recommend commercial real estate
as a separate investment category like stocks, bonds or commodities. The
problem, of course, for individual investors is that few have the means to
buy a well- diversified portfolio of buildings. Real estate investment
trusts were created nearly 50 years ago to let small investors take part in
large-scale real estate portfolios. REITs usually trade like stocks. Some
package apartment buildings, some shopping malls, but most own office
buildings, sometimes in a specific region, but often diversified
geographically. REITs benefit from rental income and capital gains when
the properties are sold. Most represent actively managed portfolios. The
National Association of Real Estate Investment Trust`s index of publicly
traded REITs gained 27 percent in the last year and averaged a 20 percent
gain over the last five years.
STEPHEN SIEGEL, CHAIRMAN, GLOBAL BROKERAGE, CB RICHARD ELLIS: The
vehicles for investment are actually much more available today than at any
time, due to the expansion of the REIT market, the real estate investment
trust, publicly traded companies on the stock exchange, and there are a
number of different options in that arena. It`s an easy entry and it`s an
easy exit for somebody, so it`s probably the most flexible vehicle for an
investor who is not normally in the world of real estate.
GURVEY: Reits can also be packaged as mutual funds and in some cases
specific groups of properties are packaged for private placement to
qualified investors. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
2/06/06:"Where Best To Invest?"-The Energy Sector
PAUL KANGAS: The bulls and the bears fought to almost a draw in 2005 as the Dow and
the NASDAQ ended the year pretty much where they started. Still, it was a
great year for investors who had money in certain sectors such as precious
metals and natural resources. So what about this year? Which industries
and companies have the best potential to outperform? In our annual look of
where best to invest, we ask a team of veteran market monitors for their
best bets. Tonight we focus on one of those choices, the energy sector.
And joining me now, noted oil and gas analyst Fadel Gheit of Oppenheimer &
Company. Fadel, welcome back to NIGHTLY BUSINESS REPORT.
FADEL GHEIT, OIL & GAS ANALYST, OPPENHEIMER & CO.: Thank you.
KANGAS: We continue to see great volatility in oil prices, especially
as concerns continue to grow over Iran`s nuclear ambitions. How much more
difficult does it make investing in the energy sector, these factors?
GHEIT: It is definitely a negative because people don`t really know
where oil prices are heading, up or down and by how much. But longer term,
I think people should take advantage of any pullback in oil prices and oil
stocks to buy these stocks, because we believe they are very cheap.
KANGAS: What areas of the sector do you think are the most promising
this year?
GHEIT: Well, this year -- last year and in the last two years, the
smaller independent companies gained the most. The exploration and
production companies that -- refining and marketing companies. The large
integrated oil companies did not do as well because most investors were
making a bet on higher oil prices and that worked for them. This year
around, we think we are going to see shift to quality, if you will. We are
going to see more shifts to the ExxonMobil, the Conoco Phillips, the
Chevron. These are the stocks that have lagged the other sectors of the
energy and are likely to do very well.
KANGAS: So in other words, the giants are going to continue to record
record profits, is that the way you see it?
GHEIT: Absolutely. Barring a collapse in oil and gas prices, which we
do not see, we think oil prices this year will average significantly higher
than the average of last year. Last year, oil prices averaged $53, which
they are likely to average at least $10 higher this year, which means more
record high profits for Exxon, Chevron and Conoco Phillips.
KANGAS: All right. How about in some of the other areas, your top
picks.
GHEIT: Well, we like -- of the independent oil and gas companies we
like Anadarko. We think it`s undervalued. We think (ph) it has tremendous
growth. We also like Pioneer. It`s a company that`s going through
restructuring. We think the upside potential in these two stocks are very
high.
KANGAS: OK and do you personally own the securities that you`ve been
mentioning here?
GHEIT: No, I do not. I own ExxonMobil. I own Chevron and Conoco
Phillips. I do not own Pioneer or Anadarko.
KANGAS: So in summary, you`re saying don`t wait for oil prices to come
down to invest in the group, is that true?
GHEIT: No. You take advantage of any pullback as a buying opportunity
because these stocks are trading at very low multiples, suggesting that oil
prices will go to $40 and that we do not see.
KANGAS: They haven`t been great dividend players. Do you see any
increases in major dividends?
GHEIT: All these companies are growing their dividend. ExxonMobil
just increased its cash difference, so has Chevron and Conoco Phillips.
These companies are generating record levels of cash flow. They are buying
back their stock at record levels. They are increasing their cash
dividend. They don`t have debt really to take down. ExxonMobil has more
cash than total debt.
KANGAS: OK, very good. Fadel, I can`t thank you enough for being with
us; we appreciate your time.
GHEIT: My pleasure.
KANGAS: My guest, Fadel Gheit, oil and gas analyst at Oppenheimer &
Company.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
2/05/06: "Commentary"-The President's Budget Proposals Need To Include The Word Permanent
SUSIE GHARIB: Tonight`s commentator has some suggestions for brightening the
nation`s financial picture, but you might not like what he suggests.
Here`s Mark Zandi, chief economist of Moody`s economy.com.
MARK ZANDI, CHIEF ECONOMIST, MOODY`S ECONOMY.COM: The president`s
state of the union was notably cautious, at least when it came to economic
policy. As the president has done many times before, he argued that his
tax cuts should be made permanent, health saving accounts expanded and more
spent on energy-related R&D. There were no new ideas in the speech, not
even a mention of last year`s proposal to privatize Social Security or to
reform the tax code.
Perhaps the president feels, given his ongoing political problems, he
is in no position to do so. This is a mistake. Despite the economy`s
currently strong performance, it faces enormous challenges, and
policymakers can`t take a year off to address them. At the top of the
agenda should be record high energy prices. Investing in alternative fuels
will at best have a long-term payoff. Energy demand must be curbed
immediately. How about a higher, variable gasoline tax? Rapidly rising
health care costs has everyone nervous. What about limiting the tax breaks
on the large premiums many businesses pay their senior management?
And then there is the nation`s darkening fiscal outlook. Should we be
making the tax cuts permanent when given the size of the current deficit,
it is clear we can`t pay for the ones we already got? You may not like the
proposals I`m making. Fair enough. The point is that someone, presumably
the president, has to make some big proposals now to begin working on these
big problems before they become insurmountable. This is Mark Zandi.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
2/06/06: "Paul Kangas' Stocks In The News"
PAUL KANGAS: Stocks spent the morning hours in neutral amid uncertainty
over interest rates and oil prices. A brokerage upgrade on Alcoa however
helped the Dow gain 15 points by noon, with the NASDAQ off just a fraction.
Stocks traded narrowly mixed the rest of the day, as traders awaited
General Motors board meeting results and Disney earnings which we`ll detail
in a few moments. So the Dow Industrial Average actually gained 4.65,
ending at 10,798.27. The NASDAQ Composite fell 3 3/4 points to 2258.80.
Standard & Poor`s 500 up nearly one point at 1265.02. In the bond market,
the 10-year note lost 4/32 to 99 20/32, putting the yield at 4.55 percent.
Once again, big board volume leader today on 29.1 million shares, Time
Warner (TWX) moving up $0.18. The company is selling its book publishing
unit to a French firm for $537.5 million.
Motorola (MOT) down $0.64.
Lucent Technology (LU) edge up $0.04.
General Electric (GE) a dime loss.
Chicago Bridge & Iron (CBI) tumbling $6.67. That`s a 23 percent
deficit. The company is terminating both its chief executive officer and
chief operating officer and says it`s voiding all previous 2005 earnings
guidance. The Steeple Knopf (ph) Nicholas brokerage downgraded it from
"buy" to just a "hold." It was fifth in volume.
Tyco Intl (TYC) moved up $0.09.
ExxonMobil (XOM) a $0.58 gain.
Nortel Networks (NT) lost $0.04. Citigroup downgraded it from "buy" to
just a "hold."
Pfizer (PFE) was down $0.19.
Micron Technology (MU) off $1.12. The story here, Citigroup upgraded
it from "hold" to "buy" and boosted its price target from $15 to $21 a
share.
Disney (DIS) a $0.05 gain or loss during the day, I should say and
after the close, in with first quarter earnings, $0.35, $0.05 above the
Street estimate. The company also is selling most of its ABC radio unit to
Citadel broadcasting. In after hours trading, Disney stock moved up about
$0.50 from where it closed in the regular session.
Alcoa (AA) another Dow stock, up $1.45. JPMorgan upgraded it from
"neutral" to "over weight" because of the high level of aluminum prices,
did the same thing with Alcan, which was up $1.72 at $49.78.
Then came General Motors (GM) which closed up $0.19. It elected Jerome
York, Kirk Kerkorian`s number one aide to the board of directors, but
there`s still no word on the dividend, if there`s going to be any action on
it.
Lafarge North America (LAF), construction materials firm, up $17.89.
France`s Lafarge, the parent company, is going to make a tender offer for
the 46.8 percent it doesn`t already own. The price: $75 a share cash, looks
like they may have to sweeten that a bit. But other construction materials
companies did very well.
Florida Rock Industries (FRK), Texas Industries (TXI) and Vulcan
Materials (VMC) all sharply higher on the news from Lafarge.
Granite Construction (GVA) up $2.41. The company boosted its previous
2005 earnings guidance of $1.55 to $1.60, all the way up to $1.95 to $2 a
share in earnings.
Then Huntsman (HUN), the chemical firm, down $1.90. It`s taking itself
off the auction block and has ended talks with a number of suitors.
American Real Estate Partners (ACP) up $3.93. This week`s "Barron`s"
financial has an article that says the stock should be worth as much as $46
a share. Incidentally, Carl Icahn is a majority holder of this stock.
Apple Computer (AAPL) topped the NASDAQ actives, down $4.55.
Google (GOOG) up $3.55. Steeple Nicholas (ph) brokerage upgraded it
from "sell" to "hold" and Bear Stearns said it expects Google to be in the
Standard & Poor`s 500 eventually.
Microsoft (MSFT) $0.37 loss.
Intel (INTC) $0.13 drop.
Cisco Systems (CSCO) fell $0.32. That was fifth in dollar volume.
Broadcom (BCOM) up $2.64.
Yahoo! (YHOO) fell $0.62.
Dell (DELL) a $0.06 gainer.
Oracle (ORCL) edged up $0.04.
And Sandisk (SNDK) losing $1.65.
J. Jill Group (JILL), look at that move, up $4.37. Talbots will
acquire this firm for $24.05 a share in cash.
Then finally, Blue Coat Systems (BCSI) plunged $15.59 after cutting
its third quarter earnings guidance in half from about $0.32 per share to
about $0.16 per share.
Nightly
Business Report transcripts are available on-line post broadcast.
The program is transcribed by eMediaMillWorks. Updates may
be posted at a later date. The views of our guests and commentators
are their own and do not necessarily represent the views of
Community Television Foundation of South Florida, Inc. Nightly
Business Report, or WPBT. Information presented on Nightly
Business Report is not and should not be considered as investment
advice. Copyright (c) 2005 Community Television Foundation
of South Florida, Inc. ALL RIGHTS RESERVED. Terms of use.
02/06/06:
Market Stats
NET PERCENT
CLOSE CHANGE CHANGE
DOW CLOSE 10798.27 +4.65 + .0
HIGH 10814.51
LOW 10770.97
NASDAQ COMP. 2258.80 -3.78 -.2
HIGH 2265.81
LOW 2249.75
VOLUME 1,525.4
PREVIOUS 1,755.5
UP VOLUME 919.6
DOWN VOLUME 594.1
DOW TRANSPORTS 4290.49 +26.93 + .6
DOW UTILITIES 407.58 +2.21 + .6
CLOSING TICK +612
S&P 500 1265.02 +.99 + .1
S&P 100 572.55 +.31 + .1
MIDCAP 400 776.02 +3.47 + .5
REUTERS/CRB 343.25 -2.65 - .8
NYSE COMPOSITE 8019.87 +18.47 + .2
VALUE LINE 433.39 +1.77 + .4
RUSSELL 2000 727.89 +3.67 + .5
DJW 5000 12807.10 +19.79 + .2
U.S. TREASURIES
5-YEAR NOTE 4.25%
Jan. 15,2011 98 27/32 -4/32 4.52
10-YEAR NOTE 4.50%
Nov. 15,2015 99 20/32 -4/32 4.55
30-YEAR NOTE 5.375%
Feb. 15, 2031 111 2/32 +1/32 4.63
LEHMAN BROS.
LONG BOND INDEX 1755.33 -1.16
DOW CLOSE 10798.27 +4.65 + .0
ADVANCES 2005
DECLINES 1337
NEW HIGHS 143
NEW LOWS 36
NET PERCENT
NYSE MOST ACTIVES 4PM CLOSE CHANGE CHANGE
TWX Time Warner 18.58 +.18 +1.0
MOT Motorola 20.53 -.64 -3.0
LU Lucent Tech 2.70 +.04 +1.5
GE General Electric 32.75 -.10 -.3
CBI Chicago Bridge 22.33 -6.67 -23.0
TYC Tyco Intl 25.11 +.09 +.4
XOM Exxon Mobil 61.97 +.58 +.9
NT Nortel Networks 3.06 -.04 -1.3
PFE Pfizer 25.09 -.19 -.8
MU Micron Tech 16.01 +1.12 +7.5
NASDAQ CLOSE 2258.80 - 3.78 - .2
VOLUME 1,836.5
PREVIOUS 2,273.7
ADVANCES 1568
DECLINES 1469
NASDAQ ACTIVES
AAPL Apple Computer 67.30 -4.55 -6.3
GOOG Google 385.10 +3.55 +.9
MSFT Microsoft 27.17 -.37 -1.3
INTC Intel 20.61 -.13 -.6
CSCO Cisco Systems 17.83 -.32 -1.8
BRCM Broadcom 70.22 +2.64 +3.9
YHOO Yahoo! 32.92 -.62 -1.9
DELL Dell 29.32 +.06 +.2
ORCL Oracle 12.25 +.04 +.3
SNDK SanDisk 62.40 -1.65 -2.6
AMEX CLOSE 1864.05 + 13.29 + .7
INDEX SHARES
DIA DIAMONDS TRUST 108.02 +.23 +.2
QQQ NASDAQ 100 40.81 -.11 -.3
SPY S&P DEP.RECEIPTS 126.60 +.33 +.3
STOCKS IN THE NEWS
DIS Disney 24.96 -.05 -.2
AA Alcoa 32.03 +1.45 +4.7
GM General Motors 23.34 +.19 +.8
LAF Lafarge No Amer 82.14 +17.89 +27.8
FRK Florida Rock Inds 57.15 +2.99 +5.5
TXI Texas Inds 57.13 +3.58 +6.7
VMC Vulcan Materials 80.42 +5.92 +8.0
GVA Granite Construct 42.40 +2.41 +6.0
HUN Huntsman 21.05 -1.90 -8.3
ACP Amer Real Estate 37.90 +3.93 +11.6
JILL J. Jill Group 23.57 +4.37 +22.8
BCSI Blue Coat System 24.74 -15.59 -38.7
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