Investment Consulting

Saturday, July 12, 2014

Assertions I learned from Bruce Berkowitz

Assertions I learned from Bruce Berkowitz

Bruce Berkowitz is an American success manager. Since late 1999 manages investment funds with FairHolme that has managed to beat the market by much difference since its inception. $10,000 invested in FairHolme at the time of its launching have now become 60,000 while of replicating the index, it would have been 17,000.

1. "We do not predict, we value. The predictions are terrible."

Investors who follow the value investing considered predictions, especially macroeconomic, as too difficult. Benjamin Graham and his students have developed a system to avoid doing things that are too difficult. Looking at the information we have today, instead of making a prediction of the future, the value investor may value an asset and make an investment decision. The key is simple: how a private buyer would pay for the asset, after knowing this, see if this price is a sufficient margin.

2. "Almost by definition of value investing, run to the actions of the majority of people flee because how else you will not get a cheap action of a good, safe company that the market believes that something is incredibly wrong?."

Most likely to find a stock at a discount to the rest of the market is when Mr. Market is afraid her. Therefore, an Value Investor must have patience (because the market can be irrational too long) and bravery (they say you have to buy when blood runs in the streets).

3. "Business the bookmakers is very old and is based on the concept of deciphering what you give and what you get. Closely resembles the investment business ... you have to find a kind of bet or chance and if you are smart and know what you do, you build a large margin of safety for that the odds are on your side."

Investors who do not understand the basics of probability and statistics are like a snake in a basketball slam dunk contest.

4. "Markets are made to be taken advantage, not to persuade us about what we should do."

For an value investor the market is not smart, but is someone generous. When a value investor hears the efficient market theories of Professor Fama at least smile, if not burst of laughter.

5. "All you can spend is cash (cash). We want companies that generate cash almost every time. That's how we started. We do not care much what you do, but we have to understand. The balance has to be strong; want to ensure that no traps in accounting. After that, try to kill the company. We think all ways that the company could die either by address stupid or for balance with too much debt. If you do not find a way to kill the company, and generate a lot of cash even in difficult times, then this is the beginning of a good investment."

Berkowitz is like Jeff Bezos in regard to attention to cash flow.

6. "When the things get tough, everything is correlated. People have to sell whatever they have. And sell what is more liquid. So until the baby goes with the your bath water "(which means that when things get bad, the error of the good things that come out along with the bad is committed. A similar phrase would be "throwing champagne with the cork")."

Assertions I learned from Bruce Berkowitz

A financial advisor can tell you are well diversified because, in their opinion, the covariance between your assets is low. Unfortunately, as many people discovered during the last financial crisis, the correlation between the price of different assets can go quickly to the point #1.

7. "That's the secret ingredient: hold capital permanently. It is essential. I think that's the reason Buffett left his partnership. You need it because when things get ugly people get nervous ... So keep much cash ... cash is the equivalent of financial Valium. Keeps you cool, calm and in full power."

8. "When something low price, I know that in business schools tell you if low or rises fast, is volatile, which is more risky. But I do not see how a stock that is down 50% means a greater risk than when it cost double. It's like when you go shopping and your favorite food is on offer. Here's your favorite company on sale. Auditors that generates cash and rarely can find a company with double digit growth in free cash flow. And of course, when panic is established, you have spectacular deals."

9. "Genetically I'm not done for short. If you are long, you're wrong, the worst that can happen is that you go to zero. If you're short and you're wrong, you can face death. The irrationality of markets can last a long time."

The short (bet that something will go down) is something that many people talk and few do. It is potentially dangerous. When I operate short, which I rarely do, I buy options, then all you can lose is what you paid for the option.

10. "Concentrated investment (not diversified) involves less risk because you have a superior knowledge of the companies you own."

The risk comes from what you do not know.

11. "The Over-Diversification will take you to a similar average return ... the price for a higher return is some volatility in the short term ... I want to give people a higher average return and have to pay that with short volatility term."

Berkowitz background is never confused with a fund that replicates the index.

12. "We have beaten the market over a significant period. We had a bad 2011 that is misleading, but that's business. Businesses suffer bumps, and those companies and fund managers have said that their processes are gentle on your business at the end have ended badly."

The decisions of an intelligent value investor are premeditated and above average rationality. For example, be brave when loss aversion is pressuring you to sell, is not something easy to do.


Bruce Berkowitz is one of the best managers in the world of value investing, or at least that's what they say their numbers so far. There are some key ideas in which Berkowitz says, which is partly related: Value Investing, Contrarian and Concentration.

Assertions I learned from Bruce Berkowitz

Thursday, July 10, 2014

The Intelligent Investor

The Intelligent Investor

The smart investor is one of the most important books in the world of investment and one of the basic for a long-term investor who wants to train in value investing.

Benjamin Graham

Benjamin Graham (1894-1976) was, although British economist and U.S. investor of birth, specializing in long-term investment. He is considered the creator of value investing.

In his first book, Security Analysis (Classics Deusto Investment and Finance), laid the foundation stone in the philosophy of value investing, but it was The Intelligent Investor book that changed the way of thinking and investing for many people and the book which remains a reference for value investors.

Knowledge and ideas of Benjamin Graham were so attractive to investors until the legendary Warren Buffett offered to work for free for him just to learn their way of investment. No doubt that Buffett took a right at the time of taking a teacher Graham decision.

The Intelligent Investor Book

Throughout the book, Benjamin Graham reels off all key concepts and necessary for long-term investing in the stock market following a value investing style.

Graham explains that the "smart" in the title does not refer to a rogue but merely prudent investor or an investor who is not seeking a quick profit but have a vision of long-term investment whose main objective is to preserve capital and is safe and secure with their investment principles as opposed to a market that is carried away by their emotions. At all times Graham focuses on long-term investment. When investing in value is necessary for long-term investment, as discussed throughout the book, this investment style is to buy shares below their true value. A short-term action may underestimate Stock Exchange, but Graham believes that over the long term will be the price that corresponds to its value and therefore the form of investment of Graham requires patience.

Benjamin Graham was always very clear about the difference between a speculator and investor. An investor is a person who is considered a business owner and looking for it mainly benefits. Meanwhile, the speculator seeks quick profit for yourself no matter what kind of company puts their money. In addition, Graham believes that while the speculator has a chance to make money speculating in the case of wrong results can be disastrous.

The intelligent speculator can not exist according to Graham and he warns of the danger of believing an investor and, in practice, be a speculator. The purchase of a quick action to avoid missing a great opportunity is, according to Graham, one speculative attitude.

Throughout the book you can see that many of the ideas we hear in Warren Buffett are the same, at the time, explained Benjamin Graham in The Intelligent Investor. It could not be otherwise because the Buffett considers himself 85% Graham and 15% Fisher.

The Intelligent Investor

Another very idea of ​​Benjamin Graham and Buffett repeats much is not trying to hit market movements. According to Graham, track market movements and speculators makes us the only reason an investor would do is to try to buy a stock that interests a discounted price in the case of being in a downward cycle.

Graham refers to Stock Exchange as Mr. Market manic depressive person changing mood and goes from one extreme to another unexpectedly. Due to the nature of Mr. Market, Graham thinks is best to take advantage of the mistakes it commits instead of trying to guess the moves it will.

Value Investing vs Growth

If the prospects for long-term growth are clear, Benjamin Graham thinks the price of the company and deducted these prospects, making it very expensive quote. Therefore, often dismiss these businesses precisely because the investment value of buying at low prices that do not reflect the real value of the company.

Investing in companies in which the expectations and predictions are very bad or are bored or ignored by the market business is one of the keys to value investing. When the market leave stock prices of companies that are not fashionable at knockdown prices is the time when a smart investor should pay attention.

For Benjamin Graham, due to market pressure either up or down, the key to making money in the on the stock exchange is not the time to buy or sell, but be disciplined enough to withstand this pressure, keep our actions, dividends receivable and wait for the market to discover the real value of the company to which it is undervalued.

Margin of Safety

Benjamin Graham in his book leaves us many concepts that remain today in key investment. One is the safety margin is basic in value investing.

The safety margin is the difference between the intrinsic value of a stock and the price of it. Sometimes, the market over-reacts and action values ​​far below their real value; is the moment when the opportunity arises for a investor value.

A simpler example can be to understand the story. If a floor is capable of generating a rent of € 1,000 per month will have an intrinsic value for its ability to make profits. Surely, if the housing market is not fashionable because investors prefer to invest in shares of technology companies, we can find very cheap floor. If the floor has an intrinsic value of 150,000 euros thanks to its ability to generate rents and sells for 75,000 euros, it is clear that there is a margin of safety and would be a good investment value. In the case of shares, the concept is similar.

Throughout The Intelligent Investor Benjamin Graham details how to find undervalued safety margin and gives examples of companies of its time companies. In addition, the updated version can read Jason Zweig comparisons and examples closest in time, especially the dotcom bubble of 2000.


Benjamin Graham's book is full of concepts and ideas essential to understand the value investing. It is perhaps a somewhat dense and difficult book to read for those who have never read anything about the stock market or investment.

To Warren Buffett, buy The Intelligent Investor is the best investment you've made in your life and at all times has a flashback to Benjamin Graham. It is common to find quotes this in his letters to investors or in his talks and speeches.

The Intelligent Investor

Saturday, July 5, 2014

My biggest investment mistake

My biggest investment mistake

Like everyone else, I have made ​​many mistakes in my life and in any stock exchange. It's someone trying to hide their mistakes and failures, but I think to hide mistakes is just that, a mistake. Mistakes, if we serve to learn and improve, are quite positive, despite the damage that we can assume temporarily. Yes, I agree with Warren Buffett and prefer to learn from the mistakes of others and not mine.

As I said, I have also made ​​mistakes in stock exchange, luckily have not been many, but some. I have not invested in any bubble, I did not use tools that do not know, I have not leveraged nor have I made ​​great follies (probably know something of value investing has helped me on this). Therefore, I have never lost money on the stock market and I made catastrophic mistakes, but I've been wrong on occasion, particularly at a time, which is what I will try in this post, and it is Telefónica.

Is not to lose a lot of money with Telefonica, but eventually I got carried away and invested in a company that I did not like and which since then drag losses. The case of Telefónica I know almost everyone. I speak from memory, but promised to pass a dividend of 1.4 euros per share to 1.6 in one year and 1.75 in two. That meant that by purchasing at the time, would have a dividend yield of more than 10% (gross).

Telefónica as a company I did not like much, I do not like his management, nor his balance and saw a rather dark future for the sector. The Whatsapp was quite unknown and very new, but had heard about it and I felt that the business of SMS was over. I also thought that the calls were within the Skype extension and the like. Yes, someone has to put the net, but the business is not the same. Anyway, I did not like the company. Of managers I'm not going to talk much, but I think they pose a burden and make wrong moves and corporate acquisitions or too late. However, despite everything, I let go of that dividend yield and invested. Since then no further action to achieve the price I bought it.

Why is my worst investment

I think because I was totally against my principles and acted irrationally. There was nothing to attract me to make this purchase, but I got carried away by the lure of a big dividend which was suspicious to see the accounts of the company. Still, I got carried away and the result was pretty bad (but not catastrophic).

- Ok, then ... you sold the shares?

In the past, when I discovered a mistake I acted and I sold. Buy & Hold does not mean buy and forget, follow the company and act as things go, yes, just act calmly and with much forethought. So if I have it clear that I was wrong, I sell. However, in the case of Telefónica, although I still think the same company, there is something that makes me continue to keep, and one of them is the connectivity between machines (M2M). The potential is huge and I think Telefonica can use it and in fact, has a good start as it has won a large contract in this field.

Investing in Telefonica when I did not like the company was a big mistake and in fact was the last time that I bought shares in a company with which I was not happy. For example, I've talked a few times of Coach Bags in Rankia it has fantastic numbers, but I so dislike the policy and strategy, although the company and its numbers could make a clear buy, rather watch from the sidelines.


Like I was wrong with Telefónica I was wrong to take a business and many other things in my life. The good thing about all this is that once you make the mistake and not repeat it again in the future, with a similar situation, salts unharmed. The experience is only achieved by doing things (the only mistake is not doing nothing), but I agree with Warren Buffett think it's best to learn from the mistakes of others. For him, the way to learn from the mistakes of others is to read as much as possible, and I try to follow.

Wednesday, July 2, 2014

Warren Buffett and the dotcom bubble: 2000

Warren Buffett and the dotcom bubble: 2000

The time puts everyone on your site, and in the case of Warren Buffett and Charlie Munger is clear that the time is over proving them right. Today we will see how Warren Buffett said in his letter to shareholders in 2000, after the dotcom bubble had exploded. Before you read this letter, you can see that he wrote in 1999 when they did not invest in Internet companies seemed silly, but Buffett and Munger decided to stay out and invest only in what they knew and understood.

Warren Buffett in 2000

Speculation, in which the focus is not on what will produce the active but on what the next person will pay for it-is not illegal, nor immoral, neither "in American," but it's not a game that Charlie or me like we play. Not bring with us nothing, so why should we take part?

The line that divides investment speculation is never clear or bright, and becomes even more blurred when most market participants have had big wins. Nothing can more sedate rationality that large doses effortlessly earned money. Given a heady experience of this kind, normally sensible people change their behavior to become like Cinderella when she went to dance. They know they are staying too long at the party, consisting of companies with very great speculate capitalizations relative to surely generate cash in the future. Therefore, all investors begin to feel dizzy, plan to leave the party just a few seconds before midnight. Although they have a problem, are in a room in which the clocks have no hands.

Last year we commented market exuberance, and yes, irrationality was what dominated the stock market, so that expectations had risen to repeatedly assume the likely returns. One indication of this was happening was the poll Paine Webber-Gallup made ​​to investors in 1999. In it, participants were asked their opinion on the annual return they expect to have in a decade. The average of the responses was 19% per annum. Surely this was an unreasonable expectation. There was no way for American businesses achieve those returns for 2009.

Were even more irrational the tremendous ratings that participants gave business market almost certainly end up being worth zero. Even so, investors hypnotized by some quotes that kept up and ignoring everything else, put their money in these companies. It was as if a kind of widespread virus among professional investors and amateurs create hallucinations in which these give a value to the actions of certain sectors often above the supports.

Warren Buffett and the dotcom bubble: 2000

This surreal scene was accompanied by a lot of talk about "value creation". We recognize that a lot of real value has been created in the last decade for new businesses or young, and there is much more to come. But the value is destroyed, not created, when you lose money throughout his life, and no matter how high can become your review.

What was really happening was a transfer of wealth. Because of certain agitators in recent years billions have been moved from the pockets of individuals to their own (and those of their friends and associates). The fact is that the bubble has allowed the creation of bubble companies, entities designed not to earn money with investors, but to earn money from investors. Too often the real goal of the founders and promoters of these companies is to bag them out without paying attention to the results.

But a pin stalks each bubble, and when the two finally meet, a new wave of investors learns some old lessons. First, there are many people on Wall Street, a community in which quality control is priceless, willing to sell investors anything they will buy these. Second, speculation is most dangerous when it looks easiest.

In Berkshire we do not try to pick the few companies that will do well in an ocean of companies that have not proven anything. Are not we smart enough to do something, and we know it. Instead, try to apply the old Aesop equation on opportunities where we have the confidence of knowing how many birds are in the bush and when they fly (an expression that my grandchildren reformulated to "a girl in a convertible is worth as 5 on your agenda "). Of course, we can never predict the timing of the cashflow exactly. However, they do try to make conservative estimates and focus on sectors where the surprises in business are unlikely and not wrecking the business. Still, we make many mistakes: remember, I'm the guy who thought he understood the economic future of trade in stamps, textiles or shoes.


Buffett and Munger were kept within your circle of competence and outside the euphoria over "a new paradigm" made ​​them stay outside major revaluations of the bubble, but beat the market during this period.

Moreover, Buffett and Munger were aware that large revaluations and high expectations, when they become somewhat extended, usually end badly, and what they do is attract people who want to make quick money, not investing.

Warren Buffett and the dotcom bubble: 2000

Sunday, June 22, 2014

How to invest in the strongest region? Best US equity funds

How to invest in the strongest region? Best US equity funds

United States ranks as the strongest region with established market leading companies. Forecasts point to an acceleration in the U.S. economy, so it may be a good time to have U.S. companies and diversify our portfolios, accessing a market that has proven its resilience in recent years. Therefore, we ask what are the best mutual funds US?

In late 2012 the U.S. economy experienced a period of stagnation from Hurricane Sandy, but last year managed to control the increase in tax obligations, maintaining a steady annual growth of GDP. The beginning of the year 2014 have been affected by adverse weather conditions, facing the HELIDO winter in the last 20 years.

What are the prospects for the U.S. economy?

U.S. stresses on aggregate as the strongest region and is in the lead in the survey results relating to business confidence, business investment prospects, dividend growth and financial health, the comment from Fidelity.
Analysts are revising upwards the estimates of the performance of companies and, for the moment, recorded an increase of about 9% this year.
Analyzing this context, we ask what indicators show an improvement in the U.S. economy.
First, the household confidence is increasing with figures close to pre-crisis, banks are facilitating access to loans growing at an annual rate of 8% -9% and there is increased demand for credit by the industrial sector .

"In every cycle there are conflicting indicators, but the underlying economic trend points to an acceleration of the global economic recovery driven by developed countries. U.S.. UU., Consumption and housing continue to show strength and we continue to expect spending recover capital as business confidence is strengthened and capital goods get older, Mark Burgess, CIO of Threadneedle "

Another important indicator is the purchase of motor vehicles during the month of March has increased at about 6% and the ISM manufacturing index edged up in April and the economy as a whole grew. The April PMI scored 54.9%, representing an increase of 1.2% since March.

How to invest in the strongest region?

Also significant re-industrialization which is facilitating the movement of cash flows. This coupled with the energy revolution where the supply of energy sources such as shale gas has caused gas prices fall, favoring industrial activity.

The corporate sector in the U.S. is an important source of momentum for the whole economy. Manufacturing activity has been strong despite recent signs of slowing down. In the fourth quarter of 2013, profits of companies in the S & P 500 rose by 10.2% over the year, posting its best quarter in two years.

In addition, the revenue growth exceeded expectations for the first time in four quarters. In the overall economy, the benefits of overseas operations have been stable in recent years, having quintupled between 1995 and 2007, however, national income -. Currently represent approximately 80% of corporate profits Americans, have recently been the main source of growth and more than doubled its numbers from its lows of 2008. strong corporate profitability and manufacturing activity still doing the business sector a bright spot in the U.S. economy

Although these figures are not spectacular in themselves, point to solid growth prospects. In this context, the normalization of U.S. monetary policy will continue its course and will be difficult to avoid some tense moments in the kinds of Treasury bonds.

What are the top U.S. equity funds?

After analyzing the U.S. market and observing the prospects it offers, we collect the best equity funds that invest in America.

Pictet Index USA - I USD

JPM Highbridge U.S. STEEP A (acc) - EUR

Pioneer Funds - U.S. Fundamental Growth A EUR ND

Robeco U.S. Large Cap Equities D EUR

We highlight funds as Pictet USA Index - I USD that replicates the behavior of the S & P 500, Pioneer Funds - U.S. Fundamental Growth A EUR ND which invests in companies with growth potential profit in USA and Robeco U.S. Large Cap Equities D EUR selecting companies value following the American philosophy.

How to invest in the strongest region?

Wednesday, June 11, 2014

Properties For Rent - The missing ingredient of your retirement plan

Properties For Rent - The missing ingredient of your retirement plan

It's no secret that America is facing a challenge in astronomical retirement. People are living longer than ever, and most of the citizens of our country do not have enough income to support themselves after retirement. 30 years, employees could count on Social Security and a good pension plan for the company through retirement. Unfortunately, today that is no longer the case. Pension plans are becoming extinct, and Social Security has numerous issues. It is unrealistic to expect that payments of benefits is likely to decrease in proportion of total retirement income needs one. That means we will be more responsible than ever for our own retirement income. That's a scary proposition for many people, but it does not have to be.

If you listen to the media, they will say that the money in your company sponsored 401 (k) or individual retirement account (IRA), which are good options sets. For example, if your company offers a 401 (k) with a company party, you should be maxing it out. Realistically, however, unless you have been making regular and substantial contributions to these retirement accounts since you were in your 20s, you're still unlikely to have enough money saved to retire with the same or better lifestyle have today. What is often overlooked is the impact inflation has on your savings. If you think you are making a return of 7 per cent in your retirement account, it really is more like 4 percent after the inflation factor.

Beyond inflation, the average life expectancy is increasing. The average life expectancy today is around 78 years. If you are planning to retire in 20 years life expectancy could be 85 years or older. We continue to make progress every year doctors that help push life expectancy even further away. Since we're talking about medical advances, but also ensures that talk about those costs. Medical expenses are not cheap, and that somehow continue to rise beyond the rate of inflation. So not only do we have to realize that living longer, but also the medical costs associated with that. Furthermore, while the average life expectancy could be 85 when you retire, do you really want to plan on just living until you're 85? What if the year is 85, and their savings gone? We need to have revenue streams that last as long as us.

While pension funds and social security, they certainly have their place, overlooked by most people is what could easily argue that the best investment vehicle for retirement homes there family rental alone. Rental properties have a number of amazing features for retirement planning vehicles do.

Properties For Rent - The missing ingredient of your retirement plan

Steady cash flow

Rental properties provide owners with a steady stream of income. Payrent tenants each month, you pay your expenses, and what remains is the flow of cash in your pocket. The beauty with rental properties as a vehicle for retirement is that the longer you have the properties, greater cash flow that tend to generate an income stream-that really grows on you. Rental prices increase over time, so unlike many other types of retirement investments inflation is almost canceled. The real trick is, eventually you will pay your mortgage, eliminating their biggest expense-leaving you with an even greater flow of income every month. It really does not matter how long I live, the revenue stream is there as long as you own the property.

In case of emergency

Beyond the rental properties monthly income stream to create, as you pay the mortgage and the property increases in value, your equity position in the property grows. In case of a medical emergency, for example, you could leverage that capital or outright sell the property to get the funds you need.


Most people aspire to leave something for their children and grandchildren when they pass. Real estate happens to be one of the best things you can give to your descendants. When you die you will know that your family will be taken care of. They can enjoy the stream of monthly income you had during your retirement years, and then pass it to their children and so on. Or they can sell the property and use the funds for something else.

Self-Directed IRA

Previously, we touched on how most of America are actually saving for retirement are making use of traditional retirement accounts such as 401 (k) s and IRAs. There is nothing inherently wrong with the savings in these vehicles, the fact that they are saving all that takes a step forward in the average citizen. That said, the stock and mutual fund investments are losing many of the benefits obtained with rental properties. If you are enthusiastic about these advantages, but have now all tied up in an IRA savings account, you can still invest in rental properties using those funds. Self-directed IRAs allow you to purchase non-traditional investments within an IRA. There are rules and regulations regarding this type of investment, however, can be done. There are a number of companies out there that
can help you, and have made the process easier than ever.


According to the latest survey of confidence in retirement, only 13 percent of Americans say they are very confident they will have enough money for retirement. If you happen to be in the other 87 percent, take a closer look at rental properties as a means to ensure that dealing with in their retirement years. No other investment out there provides income benefits, growth and tax you get with the rental of real estate.

Properties For Rent - The missing ingredient of your retirement plan

Friday, May 30, 2014

Investments - How to become rich and continue to be so

Investments - How to become rich and continue to be so

When many of us have some money to do investments, it is likely that we buy shares in a mutual fund or stock, if not before we spend on the technological apparatus of fashion. The rich really do not do that.

They tend to invest their money in property, works of art, business and other investments that the rest of us can only dream of. The way in which this particular group used their money unlike the rest of us, and makes your account balance is always positive.

Take the example of Joshua Coleman, 27. When his family sold his telecommunications company based in Chicago for $400 million in 2004, none of the family ran out to buy something extravagant.

Instead, they sought advice on how to keep their newfound wealth and even help it grow. And that search itself gave him the idea to Coleman for your next business: in 2011 he launched Momentum Advanced Planning, a company that connects people with experts in tax, legal and wealth.

If one day the business is sold, he will see a great return on investments, as happened with the first family business.

Investments - How to become rich and continue to be so

If you think that starting a business is a strange way to invest your money, then probably not among the ultra-rich.

People who have at least $30 billion in assets - known as "individuals with ultra high net worth" - investing in stocks and bonds, but also multiply your money by buying companies and investing in unusual settings, such as leasing or lease an airline.

"It's called alpha risk" says Coleman. " This type of investments can have many positive aspects."

But also disadvantages: these investments have higher risks than more traditional, so there is a greater chance of losing a lot of money. In addition, they are much less liquid than stocks and they could take months or even years to see the money in an investment.

However, even if you do not have millions to invest, you can learn a lot about how the rich get high returns on investments and apply it in your own portfolio.

Investments - How to become rich and continue to be so

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