Archive for November, 2010

Source: ZeroHedge

Is the Kriger/Keiser “Short Squeeze JPM to Oblivion” plan working? Judging by the wholesale availability of silver (or lack thereof) the answer is a resound yes. In Coin Updates News we read that “as of today, there are no longer any regular wholesale supplies of the 1 ounce through 100 ounce silver rounds and bars available for immediate delivery.  It may be possible to locate incidental quantities of some product, but most wholesalers are now promising two to four weeks delivery to allow time for the silver to be fabricated.” Over the weekend we noted that even at the smaller, retail level, Silver American Eagles sold by the US Mint, have surged to a 2010 high in just the first three weeks of November. Is America now fully intent on ending Jamie Dimon’s domination over the precious metal space?

More on the wholesale silver shortage:

As a result of the shortages, premiums have started to rise.  So far, the increases have been modest, on the order of 0.5-2%.  However, if the shortage grows, expect to see further and larger premium increases in the coming weeks.  We could see a repeat of the late 2008 gold and silver buying frenzy, where product availability got as slow as 1-4 months after payment.

At the COMEX close yesterday, registered (dealer) silver inventories fell below 50 million ounces.  Even if you include the eligible (investor) silver inventories in the COMEX bonded warehouses, which are not available to fulfill COMEX deliveries unless the investor specifically chooses to do so, there were barely 107 million ounces to fulfill around 725 million ounces of contractual obligations.  COMEX silver inventories are now down more than 10% from mid-June even while the amount of silver owed has soared!

On September 16, the COMEX further raised the silver contract margin requirement to $7,250—even though the price of silver had been dropping since November 9!  What is suspicious is that a lot of “insiders” were liquidating their silver positions starting the afternoon of November 15.  Is it possible that they may have received advance notice of the coming change in the minimum margin account requirement and sold in anticipation of lower prices the next day?

The next round of gold and silver options expiration occurs on Tuesday, November 23.  The attempt to suppress gold and silver prices upon the release of the US jobs and unemployment report on November 5 was almost a complete failure.  Unless something is done to knock down gold and silver prices before November 23, a lot of call options will be exercised, which would further increase the demand for physical precious metals.

I suspect, as do many others, that the two rounds of increasing gold and silver margin requirements were timed for no other reason other than to try to help hold down prices through November 23.

Most of this should not be news to Zero Hedge regulars who now realize that the last battle of endless fiat liability dilution is being fought not in the stock market, but in the precious metals arena, where the onslaught of physical purchases versus shorting in paper claims has never gotten as far as it has in the past month. Should JPM be forced to continue covering, not even instituting an infinite margin requirement on silver purchases by the Comex will do much if anything to prevent the “dreaded” end of a fiat system. Speaking of, if anyone has the recent performance of Blythe Masters, we would be overjoyed if it were shared with the Zero Hedge community.


Source: Bloomberg

The dollar may fall below 75 yen next year as it becomes the world’s “weakest currency” due to the Federal Reserve’s monetary-easing program, according to JPMorgan & Chase Co.

The U.S. central bank, along with those in Japan and Europe, will keep interest rates at record lows in 2011 as they seek to boost economic growth, said Tohru Sasaki, head of Japanese rates and foreign-exchange research at the second-largest U.S. bank by assets. U.S. policy makers may take additional easing steps following the $600 billion bond-purchase program announced this month depending on inflation and the labor market, he said.

“The U.S. has the world’s largest current-account deficit but keeps interest rates at virtually zero,” Sasaki said at a forum in Tokyo yesterday. “The dollar can’t avoid the status as the weakest currency.”

The Fed said on Nov. 3 it will buy $75 billion of Treasuries a month through June to cap borrowing costs. The central bank has kept its benchmark rate in a range of zero to 0.25 percent since December 2008. The Bank of Japan on Oct. 5 cut its key rate to a range of zero to 0.1 percent and set up a 5 trillion yen ($59.9 billion) asset-purchase fund.

The dollar traded at 83.38 yen as of 12:04 p.m. in Tokyo after falling to a 15-year low of 80.22 on Nov. 1. The greenback declined to post-World War II low of 79.75 yen in April 1995. The U.S. currency has declined against 12 of its 16 most-traded counterparts this year, according to data compiled by Bloomberg.

Tightening Unnecessary

There’s no need for any monetary tightening in the U.S. as even prolonged easing won’t heighten inflationary pressures with the balance sheets of banks and households still hurting from the fallout of the global financial crisis, Sasaki said.

Ten-year Treasury yields may decline to around 2.25 percent over the next year, and their premium over similar-maturity Japanese yields won’t widen, he said. The benchmark 10-year Treasury yielded 2.89 percent today.

The world economy is likely to expand 3 percent next year amid the extra liquidity provided by central banks, “repeating a pattern from early 2002 to the end of 2004” when improving risk appetite boosted stocks and commodities and the dollar fell 25 percent against the yen, Sasaki said.

With monetary easing in the U.S., Japan and Europe likely to bolster the global recovery and increase demand for yield, the yen is poised to weaken against other currencies beside the dollar to levels last seen in early 2007, Sasaki said.

Japan will refrain from selling the yen even if it strengthens against the dollar, following international criticism of foreign-exchange intervention, he said. The nation intervened in the currency markets for the first time in six years on Sept. 15 when the yen climbed to a 15-year high.

Source: Traderrog

Grain Could Rise +50% In 2011 On Drought, Shortages, Demand, And Weather.

“Soybeans, Palm Oil to Extend Rally on Chinese Purchases, Investment Demand.”

“Global prices of soybeans and palm oil are likely to extend their rally on demand from China, the biggest user, and as investors buy commodities to protect their wealth, said analysts and executives at a Guangzhou conference.” (Editor: We think the whole price sector of all grains and related oils will see price explosions. China will not be denied on either cash or credit).

“The price of July-delivery soybeans may climb to $16 a bushel from $13 should drought occur in the U.S. next summer, said Anne Frick, analyst at Prudential Bache Commodities LLC in New York. Palm oil may extend its rally into 2011, said Godrej International Ltd. Director Dorab Mistry in prepared remarks. He also predicted at the weekend that the price may gain to 3,300 Ringgit ($1,067) per ton, a level reached today.”

“Higher prices may spur costlier food, fanning inflation. World food costs climbed to the highest level in more than two years in October on more expensive meat, cereals, cooking oils and sugar, the United Nations’ Food and Agriculture Organization said. Farm commodity prices, measured by the Standard & Poor’s GSCI Agriculture Index of eight futures, climbed +37% this year as China and India grew three times faster than the U.S.”

“The growth in consumption is in China,” and, by some forecasts, is so rapid that it may test the world’s limited resources, Frick told industry officials. Should the appetite for commodities from cash-rich investors become “wild and crazy” as some executives predicted, the market “could get out of control,” she said.”

‘Soybeans for January delivery were little changed today at $12.8575 a bushel, below the $12.90 a bushel reached on November 5, the highest level for the most active contract in more than two years. Palm oil for January delivery jumped +4.4% to 3,330 Ringgit in Malaysia. The pace of China’s soybean purchases for delivery this marketing year has exceeded expectations, according to Cofco Ltd.”

“More and more companies are buying further into future months” and purchases are larger, said Chang Muping, vice general manager of the oilseed division at Beijing-based Cofco. While Chinese crushers used to buy a few months before shipping, they now buy half a year or more ahead, he said.”

“Soybean costs climbed even as global output increased to a record, signaling prices are more influenced by economic changes such as increased money supply, said Frank Zhou, general manager of protein and vegetable oil trading at Cargill Investments (China) Ltd.”

“The rates of price increases “have surprised me even as I’m bullish,” Zhou said. China’s domestic edible oil market has seen excessive price gains even with large inventories, which are an “overbought” indication, Zhou said.”

“The market will find ways to regain the balance, said Frick. China’s pace of U.S. soybean buying slowed last week, improved weather in South America will speed planting, and a predicted increase in palm oil output may alleviate tightness, she said.”

“The flipside of the question is whether China’s demand in fact supports global prices at these levels,” said Larry Li, trading director at Noble Grain China. “Purely based on fundamentals, these high levels are certainly not supported.” “What worries me is everyone in the room is bullish,” Frick said. “Who’s going to sell?”  -William Bi, &  Claire Leow

We are not ready to forecast 2011 grain and oil prices just yet. However, on a modest forecast we could see preliminarily, corn at $7-$8, soybeans at $16 and wheat at $12.00. Palm oil and soybean oil could be 150% higher in 2011 than the highest highs recorded for 2010.

Source: WLNS

Governor Jennifer Granholm is predicting more cities may face bankruptcy in the year ahead, and part of the solution, she says, should be new revenue. This is just one more issue the new governor will face on January first. The issues are mounting up, the new governor must tackle the $1.6 billion dollar deficit, revamping the business tax and now a growing list of potential bankrupt cities.

Governor Granholm: “If you continue down this path, you will have more and more cities that are going to be asking for an emergency financial manager or bankruptcy.”

The governor says there are some 68 cities, including Jackson, that are on a financial watch or are under financial stress and she contends new revenue needs to be one of the solutions. Over at the Michigan Municipal League, officials have been saying that for years. Cities are losing property tax revenue because businesses are going out of business, plus state aid to the cities is also on the decline as lawmakers reduce revenue sharing, while at the same time the cost for services is on the rise. That means there’s a chance there will be more.

Andy Shore, MI Municipal League: “No community wants to say they were the first to go into bankruptcy and the governor says they can’t, but it’s possible if the situation gets more dire and there is a bad budget, there will be communities coming in saying, we need help.”

The question is where will the new governor and lawmakers find that help.


Source: Montreal Gazette

The euro is facing an unprecedented crisis after another country indicated on Monday night that it was at a “high risk” of requiring an international bail-out.

Portugal became the latest European nation to admit it was on the brink of seeking help from Brussels after Ireland confirmed it had begun preliminary talks over its debt problems.

Greece also disclosed that its economic problems are even worse than previously thought.

Angela Merkel, the German Chancellor, raised the spectre of the euro collapsing as she warned: “If the euro fails, then Europe fails.”

European finance ministers will meet in Brussels on Tuesday to begin discussions over a new European stability plan that is expected to result in billions of pounds being offered to Ireland, Portugal and possibly even Spain.

David Cameron said he was thankful that Britain had not joined the euro, but indicated his displeasure that taxpayers in this country face a pounds 7?billion liability in any bail-out package.

The veteran Conservative MP Peter Tapsell warned that the “potential knock-on effect” of the Irish crisis “could pose as great a threat to the world economy as did Lehman Brothers, AIG and Goldman Sachs in September 2008”.

Ireland has resisted growing international pressure to accept EU financial assistance amid concerns that this would lead to a surrender of political and economic sovereignty.

However, the German government is expected to signal that Ireland may have to accept a pounds 77?billion bail-out, along with a loss of economic and political independence, as the price of preserving the euro.

Mrs Merkel said that the single currency was “the glue that holds Europe together”.

Her words came as fellow eurozone members Portugal and Spain rounded on Ireland. They fear that international concerns over the euro will lead to so-called market contagion spreading to them.

Fernando Teixeira dos Santos, the Portuguese finance minister, said: “There is a risk of contagion. The risk is high because we are not facing only a national problem. It is the problems of Greece, Portugal and Ireland. This has to do with the eurozone and the stability of the eurozone, and that is why contagion in this framework is more likely.”

Mr Teixeira dos Santos added: “I would not want to lecture the Irish government on that. I want to believe they will decide to do what is most appropriate together for Ireland and the euro. I want to believe they have the vision to take the right decision.”

He later sought to clarify his comments, insisting that Portugal was not preparing to seek assistance.

Greece had earlier added to the growing uncertainty when it said it would breach the conditions for the bail-out it was granted by the EU earlier in the year. The Greek government said its debt problem was far worse than previous dire forecasts.

Eurostat, the EU statistics agency, said Greece’s 2009 budget deficit reached 15.4 per cent of gross domestic product, significantly above its previous figure of 13.6 per cent.

George Papandreou, the Greek Prime Minister, said new European-wide taxes may now be needed to fund bail-outs.

“We need a mechanism which can be funded through different forms and different ways,” he said. “My proposal is that taxes such as a financial tax or carbon dioxide taxes could be important revenues and resources for funding such a mechanism.”

Irish ministers continued to insist publicly on Monday that they did not require a European bail-out to help meet the cost of repaying the country’s debts. However, reports suggested that it may require help to shore up its banks.

Jean-Claude Juncker, the head of the Eurogroup of finance ministers, said the eurozone was indeed ready to act “as soon as possible” if Ireland sought financial assistance. But he stressed that “Ireland has not put forward their request”.

Ireland suffered the worst recession of any major economy and has amassed government debts of more than euros 100?billion (pounds 84?billion). It has an unemployment rate almost twice as high as Britain at 13.2 per cent and has a record deficit equivalent to 32 per cent of its gross domestic product.

Senior figures at the European Central Bank lined up on Monday to insist that the Irish accept international help to reassure investors that the euro was secure.

Miguel Angel Fernandez Ordonez, the Bank of Spain governor and a member of the ECB’s governing council, said: “The situation in the markets has been negative due in some part to the lack of a decision by Ireland. It’s not up to me to make a decision. Ireland should take the decision at the right moment.”

On his Friday November 12, 2010 radio show host Alex Jones had Max Keiser as a guest and during one of the station breaks Max has a eureka moment. He advocates buy and taking physical delivery of silver bullion. This is a self fulfilling spiral that will force JPMorgan to cover it short position on silver (which they cannot) and by default raise the price of silver. There’s been a huge response to Max’s rally cry and videos are popping up all over youtube of people showing their recently acquired silver bullion.

Source: Forbes

Ananthan Thangavel of Lakshmi Capital  is long silver futures and call options for his clients– and will add to his silver positions on any pullback. He knows there are huge short positions in silver; CFTC records show that 44.1% of the gross short position in silver is held by the 4 largest traders. And he reports in a  comment on the silver market on Lakshmi’s website (“A Twist on the Silver Market”) that “Some traders I have spoken with are targeting the 40-50 level within 4 months.” A chart of silver prices shows that silver in recent  weeks has outshone the rise in gold prices by jumping  50% from around $18 to nearly $30 and then backed off to $27.16 today. This extraordinary increase in the price of silver suggests that short covering might explain  part of the gain.

Nevertheless, bullishness on silver is also based on the feeling that “the world’s silver supply and mining production is not enough to satisfy the increasing industrial demand as well as vastly increasing investment demand, Thangavel wrote me in an email Nov. 10. Only 116.1 million ounces of silver out of 2009 production of 709 million ounces were available to satisfy investment demand. “This huge shortfall indicates that the outstanding short position cannot be solely on behalf of producers, because there is a far larger outstanding position that could possibly be hoped to be mined this year, ” Thanagvel wrote today.

“For months and in  some cases years, conspiracy theorists and market pundits have been speculating about the manipulation of the silver market by large banks, including JP Morgan and HSBC,” Thangavel wrote today.  “Recently, these theories have been given significant weight as CFTC Commissioner Bart Chilton stated his belief that the silver market was being manipulated.”  Chilton stated that “there have been fraudulent efforts to persuade and deviously control” prices in the silver market, which “should be prosecuted.”

On October 26, Chilton stated at a CFTC meeting that “I believe violations to the Commodity Exchange Act have taken place in silver markets and that any such violation of the law in this regard should be prosecuted.” A JPM Chase spokeswoman refused to comment at all on rumors in the marketplace.

As a result of Chilton’s  public statement,  several individual investors  brought lawsuits against JP Morgan and HSBC, claiming  they lost money on positions they took in silver futures on  the Comex. One such suit claims that in  August, 2008 JP Morgan and HSBC controlled over 85% of the commercial net short position in COMEX silver futures, and that this represented a short interest of 169 million troy ounces of silver, equal to about 25% of annual world mine production.

The suit charges alleges that beginning in March, 2010 “the net short positions of silver futures held by commercial banks, of which Defendants comprise the vast majority, have been reduced by more than 30% .” And the suit alleges that silver’s dramatic gains to its highest level in 30 years were caused by the buying  back of silver futures contracts.

Source: Natural News

In yet another significant blow to the TSA’s naked body scanners, the president of the Allied Pilots Association (APA) issued a letter urging all pilots to opt out of the naked body scanners, also known as Advanced Imaging Technology (AIT).

“Backscatter AIT devices now being deployed produce ionizing radiation, which could be harmful to your health,” wrote Allied Pilots Association president Dave Bates. He then went on to add:

“We are exposed to radiation every day on the job. For example, a typical Atlantic crossing during a solar flare can expose a pilot to radiation equivalent to 100 chest X-rays per hour. Requiring pilots to go through the AIT [naked body scanner] means additional radiation exposure. I share our pilots’ concerns about this additional radiation exposure and plan to recommend that our pilots refrain from going through the AIT. We already experience significantly higher radiation exposure than most other occupations, and there is mounting evidence of higher-than-average cancer rates as a consequence.”

He goes on to call for airline pilots to be exempted from security screening.

Air travelers get the same radiation

Air travelers subjecting themselves to the TSA naked body scanners are exposed to the same radiation as pilots who are scanned by those machines, of course. The ionizing radiation emitted by the body scanners is concentrated on the skin, says Dr David Brenner, head of Columbia University’s center for radiological research. And it could cause skin cancer in a small but significant number of people who may be susceptible to gene mutations (…).

Although the amount of radiation emitted by these machines is considerably lower than the radiation received while flying at high altitude, this is “artificial radiation,” and by that I mean it is radiation that’s focused by a man-made machine rather than propagating as ambient background radiation. And when radiation is focused on a target subject through a man-made machine, things can go wrong. How many medical CT scanners have been found to be mis-calibrated, operating at radiation doses that were orders of magnitude higher than their safe levels? This happens every day in hospitals across the world today, and these CT scanners are operated by professionally-trained radiology experts! (…)

The APA doesn’t want its pilots going through the TSA’s naked body scanners precisely because these machines add a radiation burden to your body. And for what? For the illusion of airport security?

Do you realize what kind of intense background checks pilots have to go through in order to fly a passenger airliner? They are subjected to rigorous physical and psychological testing as well as criminal history background checks. Pilots are not a risk to air security. To treat them like terrorists at security checkpoints is a demeaning yet useless waste of taxpayer dollars.

Clearly, the whole point of subjecting pilots to these demeaning pat-downs is to remind them they all live in a police state. It has nothing whatsoever to do with actual security. (Have you ever heard of a PILOT hijacking a passenger airliner in the US?)

And of course that’s the whole point of subjecting air travelers to naked body scanners, too: All the sheeple have to be reminded from time to time that they are under the control of government agents. Hence the “you’re under arrest” position of the arms that travelers are told to assume when passing through the naked body scanners. This body position, with both hands held over your head, gets the public used to assuming the “I surrender” position when confronted with authority figures. It’s really more of a training program to get the public indoctrinated for yet more police state tactics down the road.

Fortunately, more and more people are now opting out of the naked body scans. Sure, they get felt up by TSA agents who grope their crotches, breasts and buttocks (…), but at least they don’t get subjected to yet another dose of ionizing radiation that can contribute to skin cancer.

Don’t you find it fascinating, by the way, that the U.S. government tells everybody to avoid tanning salons because they claim “UV radiation promotes skin cancer,” yet when it comes to airport security, they want to subject you to a far more harmful wavelength of radiation “for your safety” ? (X-Rays are far more harmful than ultraviolet light.)

I guess radiation is all okay as long as it serves the police state interests of the federal government.

Source: NYPOST

The Pentagon said Tuesday that a missile launch off the southern coast of California remained “unexplained” and that its mysterious origins meant that it was not possible to rule out any threat to the homeland, Fox News Channel reported.

Earlier Tuesday, NORAD (North American Aerospace Defense Command) and NORTHCOM (United States Northern Command) officials told Fox there was no threat, but Pentagon Spokesman Col. Dave Lapan would not confirm that because the military does not know what the missile was or where it came from.

Lapan added that the incident did not appear to be a regularly scheduled test, as no warnings to mariners or airmen appeared to be issued ahead of its launch.

The contrail was caught on camera by a KCBS news helicopter at around sunset Monday evening, approximately 35 miles out to sea and west of Los Angeles.

The missile appeared to be launched from the water, and not from US soil, Lapan added.

The military was trying to solve the mystery using the video from KCBS as there was no indication that NORAD and NORTHCOM were able to detect it independently.

According to Fox News, NORAD and NORTHCOM would only say they were aware of the launch.

However one unnamed senior defense official added: “There was no threat to the homeland.”

A navy spokesperson previously told KCBS that no navy activity was reported in the region.

A sergeant at Vandenberg Air Force Base in Santa Barbara County said a Delta II rocket was launched from the base last Friday, but insisted there were no launches since then.

On viewing the footage, former deputy defense secretary Robert Ellsworth speculated on KCBS that the launch could be a show of military muscle.

“It could be a test-firing of an intercontinental ballistic missile from a submarine … to demonstrate, mainly to Asia, that we can do that,” Ellsworth said.


Source: Telegraph

Right from the start of the financial crisis, it was apparent that one of its biggest long-term casualties would be the mighty dollar, and with it, very possibly, American economic hegemony. The process would take time – possibly a decade or more – but the starting gun had been fired.

At next week’s meeting in Seoul of the G20’s leaders, there will be no last rites – this hopelessly unwieldy exercise in global government wouldn’t recognise a corpse if stood before it in a coffin – but it seems clear that this tragedy is already approaching its denouement.

To understand why, you have to go back to the origins of the credit crunch, which lay in the giant trade and capital imbalances that have long ruled the world economy. Over the past 20 years, the globe has become divided in highly dangerous ways into surplus and deficit nations: those that produced a surplus of goods and savings, and those that borrowed the savings to buy the goods.

It’s a strange, Alice in Wonderland world that sees one of the planet’s richest economies borrowing from one of the poorest to pay for goods way beyond the reach of the people actually producing them. But that process, in effect, came to define the relationship between America and China. The resulting credit-fuelled glut in productive capacity was almost bound to end in a corrective global recession, even without the unsustainable real-estate bubble that the excess of savings also produced. And sure enough, that’s exactly what happened.

When politicians see a problem, especially one on this scale, they feel obliged to regulate it. But so far, they’ve been unable to make headway. This is mainly because the surplus nations are jealous defenders of their essentially mercantilist economic models. Exporting to the deficit nations has served them well, and they are reluctant to change.

Ironically, one effect of the policies adopted to fight the downturn has been to reinforce the imbalances. Fiscal and monetary stimulus in the US is sucking in imports at near-record levels. The fresh dose of quantitative easing announced this week by the Federal Reserve will only turn up the heat further.

What can be done? China won’t accept the currency appreciation that might, in time, reduce the imbalances, for that would undermine the competitiveness of its export industries. In any case, it probably wouldn’t do the trick: surplus nations have a habit of maintaining competitiveness even in the face of an appreciating currency.

Unable to tackle the problem through currency reform, the US has turned instead to the idea of measures to limit the imbalances directly, through monitoring nations’ current accounts. This has already gained some traction with the G20, which has agreed to assess the proposal ahead of the meeting in Seoul. As a way of defusing hot-headed calls in the US for the imposition of import tariffs, the idea is very much to be welcomed, as a trade war would be a disaster for all concerned. China, for one, has embraced the concept with evident relief.

Unfortunately, the limits as proposed would be highly unlikely to solve the underlying problem. Similar rules have failed hopelessly to maintain fiscal discipline in the eurozone. What chance for a global equivalent on trade? With or without sanctions, the limits would be manipulated to death. And even if they weren’t, the proposed 4 per cent cap on surpluses and deficits would only marginally affect the worst offenders: for a big economy, a trade gap of 4 per cent of GDP is still a massive number, easily capable of creating unsafe flows of surplus savings.

No, globally imposed regulation, even if it could rise above lowest-common-denominator impotence, is unlikely to solve the problem, although it might possibly stop it getting significantly worse. But what would certainly fix things would be the dollar’s demise as the global reserve currency of choice.

As we now know, dollar hegemony was itself a major cause of both the imbalances and the crisis, for it allowed more or less unbounded borrowing by the US from the rest of the world, at very favourable rates. As long as the US remained far and away the world’s dominant economy, a global system based on the dollar still made some sense. But America has squandered this advantage on credit-fuelled spending; with the developing world expected to represent more than half of the global economy within five years, dollar hegemony no longer makes any sense.

The rest of the world is now openly questioning the merits of a global currency whose value is governed by America’s perceived domestic needs, while the growth that once underpinned confidence in its ability to repay its debts has never looked more fragile.

Already, there are calls for alternatives. Unwilling to wait for one, the world’s central banks are beginning to diversify their currency reserves. This, in turn, will eventually exert its own form of market discipline on the US, whose ability to soak the rest of the world by issuing ever more greenbacks will be correspondingly harmed.

These are seismic changes, of a type not seen for a generation or more. I hate to end with a cliché, but we do indeed live in interesting times.

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