Category: politics

Wednesday, 17 August 2011

08:37 – The results of the Merkel-Sarkozy summit are in, and they’re exactly what I predicted. Nothing whatsoever. Merkel and Sarkozy issued a statement expressing their joint determination to do whatever it takes to defend the Euro, as long as it doesn’t involve them spending any money. No Eurobonds, no expansion of the pathetically small bailout fund, nothing. Business as usual, in other words.

Oh, come to think of it, they did propose that all 17 Eurozone nations be required to amend their constitutions to include a balanced budget amendment and cede their national sovereignty to Germany, which would in turn agree to make the trains run on time. And, in a sop to hard-pressed European banks, all of which are bankrupt by any normal definition of that word, they also proposed a Tobin tax on financial transactions, which would merely drive economic activity out of the Eurozone. Fortunately, actually implementing anything they proposed will take years, by which time the Euro will be only a distant memory. In effect, Angie and Nick sat around discussing which hors d’oeuvres to serve at their next dinner party while their house burned down around them.


I spend some time yesterday looking into prepared slides to include in the kit for the biology book. There are two alternative, neither of them good. First, I can buy prepared slides sourced from China or India. Some of these are actually quite good, and they can be priced at only a couple bucks each on average. The problem is figuring out exactly what they are. I can’t buy slides from the companies in China and India that actually make the slides. I have to buy from US distributors, who have no clue what the slides actually are. If I’m lucky, they’ll specify the genus and species of the specimen or the type of section. If I’m very lucky, they’ll specify the genus and species of the specimen and the type of section. If I’m extremely lucky, they’ll specify both of those and the type of staining.

And it’s nearly impossible to ensure that a sample slide I look at will be representative of the actual slide when I order it in bulk. For example, yesterday I asked a distributor rep if I ordered a slide set from them if it would have the exact same slides that I could order from them individually in bulk. She said yes, but then added, “But sometimes they’re dyed different colors.” Arrrghhh.

The alternative would be to order slides from the one US company that still produces them. Those slides are absolutely gorgeous. I’ve seen examples. And, rather than the two or three word description common with Chinese and Indian prepared slides, their descriptions often run a paragraph, giving details about the exact species, histology and sectioning method used, and staining protocol. The problem is, those slides sell for $6 or $7 to $25 each. A set of 25 slides could easily run $250 or $300. That’s far, far outside the budget of most home schoolers, who see apparently similar sets advertised for $50 or $60.

Unless I can find a reliable source of inexpensive prepared slides, I suspect that what I’m going to end up doing is ordering inexpensive prepared slides in bulk and then checking each individual slide before adding it to a set. For example, if I’m putting together 100 sets of 25 slides, one of which is Amoeba proteus, I’ll order 100 Amoeba proteus slides and run each of them through my microscope to verify that it’s usable. I can probably verify 100 slides per hour, which means that 100 sets of 25 slides will require 25 hours of my time just to verify the slides.

Actually, it may not be that bad. I used the A. proteus example because I once saw a Chinese prepared slide that was allegedly A. proteus but had no amoeba under the coverslip. For most specimens, that won’t be a problem. I can simply view one slide and if it’s acceptable the others will also be acceptable. But for “feature” slides, such as a slide showing specifically a particular stage of meiosis, I’d need to check each slide.

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Saturday, 13 August 2011

11:58 – The Euro farce continues to degenerate. All parties are desperately searching for a solution, except Germany and the other conservative northern tier countries, which know there is no solution. The Euro is and always has been fundamentally broken. Every competent economist knew that even before the Euro was introduced. Even I knew that before the Euro was introduced.

The fundamental problem is that it is impossible to have a monetary union without a fiscal union, and Germany, the Netherlands and Finland would be insane to agree to such a union, particularly now. As Milton Freidman predicted back around the time the Euro was adopted, it would collapse at the first serious economic crisis. And that’s exactly what’s happening now. Also, as I and others predicted, the ridiculously expensive social programs in Europe would bankrupt them, and that too is coming to pass.

Simply put, there is no solution to the Euro problem, or at least there is no solution that is acceptable to all parties involved. Greece, Portugal, Ireland, Spain, Italy, and other bankrupt EU nations are now clammering that there’s no alternative to a fiscal union, starting with expansion of the EU bailout fund from its current €440 billion to something in the €3 trillion to €4 trillion range and followed by the introduction of Euro bonds, which are basically blank checks that allow the bankrupt EU nations to borrow as much as they wish and have Germany pay the bills. The problem is, Germany is no more likely to agree to those measures than I am to cosign a mortgage loan for a homeless drug addict. At least I’d have a better chance of being repaid than Germany would.

The only possible solution is one that European politicians are not (yet) ready to speak of. Germany and the other rich northern nations need to leave the Euro and go back on their own currencies. That leaves the Euro bankrupt, along with all of the countries that would still be using it, including France and Belgium. Holders of Euro-denominated bonds from those bankrupt countries would lose essentially everything. They’d be lucky to get one cent on the Euro. But eventually the markets would adjust. Greece, Portugal, et al. would not be able to borrow any money, and would return to being very poor nations, which they’ve actually been all along.


I’m doing laundry, and I just went into my lab to collect towels. It occurs to me that one of my unusual personality quirks is how I handle used towels, paper towels, surgical gloves, disposable pipettes, and so on as I’m working. I toss them on the floor, to be collected and washed or disposed of later. Same thing on the very rare occasions when I contaminate a set of splash goggles. Onto the floor they go, and I pull a new set off the shelf.

I actually remember when I started doing this, as a teenager working in my darkroom. I dried my hands with a towel, which turned out to be contaminated with a processing chemical. I then touched a print, which was ruined. From that day forward, as soon as something becomes contaminated, onto the floor it goes. That way, I know that an item on a counter must be uncontaminated, or it would be on the floor. So, there is method in my madness.

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Friday, 12 August 2011

08:56 – Colin turns 6 months old today. He’s a huge puppy, already as large as most adult male Border Collies. Duncan was a big boy, at 75 pounds (34 kilos) and about 4″ (10 cm) taller than other male BCs, but I think Colin will be bigger still.


The US Postal Service is losing $8 billion a year and is now in what amounts to Chapter 11 bankruptcy, or would be if it weren’t a pseudo-government agency. It’s due to make a $5.5 billion payment to its retirement fund next month which it doesn’t have the money to make. The USPS has announced plans to cut 220,000 jobs, or 30% of its workforce, between now and 2015. About 100,000 of those will be by attrition, but the remaining 120,000 will be actual people losing their jobs. It also plans to close thousands of post offices.

That’s actually much too little, much too late, and doing the wrong thing anyway. Service levels will be badly impacted by those cuts, which will in turn further reduce mail volume as mailers shift even more quickly to alternatives. What the USPS needs to do is:

1. Eliminate rural free delivery, which is extremely costly. Establish population-density metrics to determine whether any particular home or business is eligible for free delivery or must pick up its mail at the nearest post office.

2. Negotiate “last mile” delivery agreements with UPS and FedEx, whereby UPS and FedEx deliver packages to USPS distribution centers, and the USPS makes the local deliveries to the recipients. Eventually, eliminate most local deliveries by USPS personnel and negotiate contracts with local businesses for last mile deliveries. That is, the USPS should be making one delivery per neighborhood to a local contractor who actually delivers the mail and packages to homes.

3. Crush the postal unions and reduce pay and benefits to no more than a third of what they are now, for both current employees and retirees. Right now, post office employees are paid at least two to three times more than they’d earn for doing the same job in private industry. Retirement and medical benefits are ridiculously high. All of that needs to stop if the USPS is to have any chance of surviving.


Despite the protests of the Big Three credit-rating agencies and the French government, the market believes that France doesn’t deserve a AAA rating. And they’re absolutely correct. If the USA is only AA+, France should be at least two or three levels below that. Forget S&P and Moody’s and Fitch. If you want a real credit rating, all you need to do is look at what the free market says the credit ratings really are. That’s what the basis points on credit default swaps provide, and it’s instructive to look at CDS prices for the various countries.

Greece ~ 1,800
Portugal ~ 900
Ireland ~ 800
Italy ~ 400
Spain ~ 400
France ~ 150
Austria ~ 140
Germany ~ 90
UK ~ 85
US ~ 55

A basis point is 0.01%. These CDS prices vary constantly, but they represent the actual free-market cost to insure a bond against default. So, for example, the one-year premium to insure $1,000 of Greek bonds against default is $180, while at the other end of the risk spectrum, it costs only $5.50 to insure $1,000 of US debt for one year. That’s why it’s ridiculous for ratings agencies to assign AAA ratings to the UK, Germany, Austria, and France while assigning the US a lower rating. The free market gives the real ratings, and they’re completely out of line with what the ratings agencies are saying. I know which I trust more.


11:22 – This has been a stunning week for medical discoveries that are potentially huge breakthroughs. Earlier in the week, a PLoS paper reported incredible results with a process called DRACO, in which cells that have been infected by a virus (and only those infected cells) can be forced to undergo apoptosis, which kills the infected cells, leaving the viruses without host cells. The really significant thing about DRACO is that it is not virus-specific, like nearly all current antiviral treatments. Any cell that has been infected with any virus (presumably; DRACO was shown to be effective against 17 widely different viruses) is detected and eliminated. And here, Derek Lowe reports on a potential breakthrough that does pretty much the same thing against leukemia, and presumably eventually other cancers.

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Thursday, 11 August 2011

08:14 – Interesting article in the paper this morning about cable/dish cutters. Last quarter, cable TV and satellite companies showed a net loss of between 380,000 and 450,000 households. The article attributes most of that to people cutting back because of the poor economy, including kids who’ve moved back in with their parents no longer needing their own subscriptions. It claims that on-line viewing is a minuscule factor in the falling number of cable/satellite subscribers. Of course, it also says that people can watch TV episodes on Netflix for free.

What’s never reported is the number of people who’ve downgraded their cable/satellite subscriptions. Barbara and I fall into that category. We cut back several years ago to the minimum cable TV level, which gives us only local stations for something like $10/month. We use Netflix, both disc and streaming, for nearly all our viewing. Many of our friends have also cut back their service levels, albeit often not as dramatically as we did. But many of them who were paying $100+ per month for TV service are now paying half that or less, and using Netflix for a large percentage of their viewing. This phenomenon is probably more of a threat to cable/satellite providers and networks than those who out-and-out cut the cable.


I finally saw an article yesterday that mentioned the dirty little secret of ratings agencies. The truth is that few investors pay any attention to anything they say, particularly about sovereign and large corporate debt. In fact, many investors have made lots of money by adopting contrarian strategies, buying instead of selling when one of the Big Three ratings agencies downgrades a country or corporation. When S&P downgraded US debt, investors ignored them in droves. Investors remember that these agencies were rating junk mortgages AAA right up to the moment they collapsed, and that these agencies are paid by those who they’re rating. Even a cursory look at how the market rates sovereign debt tells you just how far from reality these agencies’ ratings are, and just how little attention the market gives the ratings.

Based on yields and the free-market price to insure sovereign debt, for example, Germany is a worse risk than the UK, which in turn is a much worse risk than the US. In fact, based on market behavior, US debt is the only major sovereign debt that should rate AAA, with Germany and the UK two or three steps below that, and France lower still.

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Wednesday, 10 August 2011

08:38 – As it turned out, all the discussion about security of digital camera images was moot. When Barbara got home yesterday, she told me that she’d removed our memory card from our DSLR and was using a memory card that belongs to her law firm.

The first 28 chemical blocks are complete, with the exception of 0.1 M IKI (iodine/potassium iodide) solution, which I’m in the process of making up. I actually have iodine and potassium iodide in inventory, so I could make up the solution directly from the two chemicals. But I’m preserving my stock of iodine crystals by working from purchased Lugol’s iodine, which is an aqueous solution of 2.2% iodine and 4% potassium iodide. To get a solution that’s 0.1 M with respect to both iodine and potassium iodide, I have to add a small amount of iodine to the Lugol’s solution and then dilute it. The problem is, it takes the iodine forever to go into solution. So I have a volumetric flask partially full of Lugol’s iodine solution to which I’ve added some iodine crystals. Every time I think about it, I give the flask a swirl. After several days, the iodine will eventually go into solution.

This is all because about three years ago the DEA reclassified iodine as a List I chemical, supposedly to combat illegal manufacture of methamphetamine. All they’ve really done is make things more difficult for people who need iodine for legal purposes. It used to be you could order iodine from any lab supplies vendor. For that matter, you could walk into the outfitter store at the mall and buy a bottle of iodine crystals. Now, anyone who wants to sell iodine has to jump through legal hoops to do so. There are all kinds of requirements, including keeping detailed paperwork on sales. And, if it turns out that the iodine you sell has been diverted to illegal use, you can be held responsible. Finally, the necessary license to sell iodine costs something like $2,500 per year, which means that most companies that used to sell iodine now find it uneconomic to do so.

The “trigger level” for iodine sales is now one bottle containing no more than one fluid ounce of a solution that contains no more than 2.2% iodine. If you go into Walgreens, you’ll find they still sell bottles of iodine solution of that size and concentration, which they can sell without restriction, as long as they sell only one per customer per transaction. But when I order one liter of 2.2% Lugol’s solution from one of my vendors, they have to record the transaction details and provide them to the federal government. In theory, the feds could show up at my door and ask me to provide details about the disposition of that liter of Lugol’s solution. In practice, that’s very unlikely to happen, but even so.


The Euro drama continues, with France increasingly under the gun. Right now, France is desperately worried that it will lose its AAA bond rating. As well it should. If US bonds are no longer rated AAA, no other major country’s bonds should be rated AAA. Rating the bonds of France, the UK, and Germany AAA while the US rating is lower is simply ridiculous. The US is much, much less likely to default on its bonds than any of those other countries, whose economies are in much worse shape than ours. The markets themselves have shown how ridiculous S&P’s rating reduction for US debt is. Since S&P reduced the US bond rating, risk-averse investors have greatly increased their purchases of–you guessed it–US bonds. Yields on US bonds have continued to fall, indicating that the markets think US debt is the safest there is. The demand for dollars is so high that US banks literally don’t want any more dollars from foreigners, because the banks have to pay to insure those deposits. Large US banks have started charging foreigners who want to make deposits. That’s right. Negative interest.

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Monday, 8 August 2011

09:48 – I see that Spanish and Italian bond yields are down slightly because the ECB has begun buying them. That won’t last long, either the ECB buying these junk bonds or the lower yields on Spanish and Italian debt. At a very high price, the ECB has bought a few weeks at best, and more likely a few days. And the first shoe has dropped. A national political leader, the former prime minister of Finland and the current leader of the opposition party, has suggested a break-up, with the northern FANG nations splitting off from the bankrupt southern tier, a proposal that is almost certain to gain the support of Germany, the Netherlands, Austria, and Luxembourg.


Work on building more chemistry kits continues. The first batch of chemical blocks is mostly complete, and that’s the part that requires most of the work.

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Sunday, 7 August 2011

08:53 – Mainstream European newspapers are now starting to talk about the collapse of the Euro and the breakup of the EU, not just as a possibility but as something that’s likely to occur. Of course, their timeframe is wildly optimistic. I just read one article that quoted an economist as saying he estimated only a 20% likelihood that the Euro (and therefore, inevitably, the EU itself) would last in its present form for 10 years. Ten years? Give me a break. I’d estimate there’s only a 20% probability that the Euro will last in its current form for the next 90 days, and maybe a 1% probability it’ll still be around at the end of the year. In fact, it wouldn’t surprise me if the Euro and the EU crashed by the end of this month.

Many people disagreed with me that Germany will return to the Deutschmark, or something very like it, but I still think that’s almost certain to happen. Or, if Germany decides not to go it alone, it may form a new union with Austria, Holland, Luxembourg, and Finland. I think that’s less likely than Germany going it alone, if only because Germany is now well aware of the extreme hazards of a currency union without a political union and a fiscal union, and those are not things Germans are likely to tolerate.


Work on building more chemistry kits continues. I’m filling, capping, and sealing containers and Barbara is labeling them. She can do that about twice as fast as I can do my part, so I try to get a backlog built up while she’s doing other things.

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Friday, 5 August 2011

08:29 – Black Friday. I suspect that when we look back upon this day, we’ll see it as the day the Euro died. And probably the EU itself. Even Barroso, the chief EU cheerleader, now concedes that the “contagion” has spread beyond the periphery. After denying, as late as Wednesday afternoon, that it would even consider doing so, Spain has now withdrawn a bond auction scheduled for later this month, in hopes that people won’t notice that its bonds are nearly worthless.

With the stock market crashes across the world yesterday and US employment numbers that are likely to be worse than everyone fears due later today, the stage is set for a real Black Friday on the markets today. And most of the EU country leaders have caught the last train for the coast, unwilling to interrupt their planned vacations. Geez.

Incidentally, for weeks news reports have been using the word “unsustainable” with regard to bond yields. I read an article this morning that reported that benchmark 10-year Spanish and Italian yields were “approaching 7%, a level that most economists consider unsustainable”. Just to be clear, there is no single rate that marks the “unsustainable” boundary. It varies from country to country, according to its own economic situation. For countries in horrible economic shape, like Spain and Italy, that rate doesn’t have to get to 7% to be unsustainable. For them, 6% is just as unsustainable, as is 5%, as is 4%. Looking at the numbers, I think 3% or even 2% is unsustainable for Spain and Italy. In fact, they’re both in such bad shape that anything much over 0% is unsustainable.


Barbara is taking the day off work today to help me build more chemistry kits. Just in time, too, because we’re down to less than half a dozen in inventory.


21:37 – Oh, my. The United States of America, which has had a AAA credit rating since before my mother was born and before my father’s father was fighting in the trenches in France, has now been downgraded by S&P to AA+. It’s ridiculous, really, and unlikely to have any real effect on US debt yields. After all, where else will investors put their money? Britain, despite its AAA rating, and Japan have higher debt loads than the US, and less dynamic economies. Switzerland is solid, but much too small to matter. The Euro is a joke. No one in his right mind would buy Asian debt. And does anyone really believe that bonds issued by Belgium, which hasn’t even had a government for the past year or so, are of the same risk level as US bonds?

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Thursday, 4 August 2011

09:31 – I read an interesting article the other day on CNN or FoxNews about small business owners pawning their Rolexes to meet payroll, and a second article about lending being extremely tight even for those with top-notch credit ratings. Interest rates are very low, which means nothing if no bank will lend you money.

Fortunately, I don’t want to borrow money. In fact, the last thing I want is to borrow money. That may seem odd for someone who’s just starting a small business, but in my experience the two biggest causes of small business failures are borrowing money and hiring employees. When Barbara and I talked about this new business, I told her that I intended to fund it out-of-pocket and that I would not hire our first employee until Barbara and I were run ragged and also had some assurance that the hectic pace was not merely a seasonal bump in sales. And, even then, I’d almost certainly contract work out or, as a last resort, hire a temp/part-time employee.

The problem with borrowing money or hiring employees is that you give up control by doing so. As long as we avoid either, we don’t have to worry about making a loan payment or meeting payroll, which is the way I want it. Now, if only the US government would be equally careful with our money.


Inventory of the chemistry kits is getting perilously low, so Barbara is taking the day off from work tomorrow to help me build more. We have enough components to build another dozen or so kits, and all but one of the components needed to build 50 or so more beyond that first dozen. The problem is, that one component is back-ordered for about the next three weeks. So we’re going to build all of the kits, but missing that one component. That way, we can just drop in that one component when it finally arrives and have kits ready to ship.

I’m also preparing purchase orders that I can drop on a moment’s notice if kit sales pick up quickly as the new school year approaches. Making up all the chemical solutions for any arbitrary number of kits is a couple days’ work, whether I make up enough for 50 kits or 500. The really time-consuming steps are filling and labeling the containers, assembling and packaging the chemical blocks, making up the small-parts bags, and assembling the kits themselves. For 50 kits, that’s maybe three days’ work for Barbara and me working together.


The media, including most of the financial media, is putting as favorable a spin as possible on today’s Spanish bond auction, although of course the yields remain disastrously high. That WSJ article does mention one significant factor that’s being generally ignored in news reports: a large and increasing percentage of Spanish bond sales are being made to Spaniards. The latest figures the WSJ quotes are for the end of last year. I suspect the percentage of Spanish bonds being bought by non-Spaniards is much lower now. And what few of the reports mention is that Spain has to sell another €38 billion in bonds–more than ten times as much as they sold today–between now and the end of the year. Good luck selling €38 billion worth of bonds into the Spanish economy, which is already nearly saturated.

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Wednesday, 3 August 2011

08:36 – The Euro crisis is now in the end game, with everything worse than it was just before the crisis summit at the end of last month. Italian and Spanish bond yields have hit record highs, remaining above 6% all week. The Spanish government is on the way out, with early elections called for November, which is much too late to matter. Spain will have defaulted before the new government is even elected. Italy is on the verge of requesting a gigantic bailout, which the ESFS has neither the authority nor the means to grant. And tomorrow Spain will auction more of its worthless bonds, with the yields expected to be even more disastrous than those of the last couple of weeks. Meanwhile, tiny Cyprus is the latest EU country to join the Bailout Brigade, mainly because it was foolish enough to hold a lot of Greek bonds. Well, that, and the fact that it accidentally blew up its only electric power plant by improperly storing tons of explosives right next to it. Talk about shooting themselves in the foot.

Someone asked me why I keep harping on bond yields. It’s simple. The US currently pays about $200 billion per year in interest on its debt. Italy, whose population is about a fifth that of the US and whose debt is approaching $3 trillion (120%+ of GDP), has huge amounts of debt coming due in the near future. If Italy had to roll over all of that debt at current bond yields, it would be paying about the same dollar amount per year on its debt as the US is paying on its debt. In other words, at $200 billion per year, US interest payments amount to about $660 per year for every man, woman, and child. At the same level, Italian interest payments would amount to about $3,300 per year for every Italian man, woman, and child. Now, of course, not all of that debt is due to roll over soon, but enough of it is that the increased interest payments that would be required at current bond yields are sufficient to bankrupt Italy.

The Spanish situation is a bit different. Spain has a much lower debt load than Italy, but Spain also has structural unemployment that’s optimistically stated to be 21%. In reality, of course, it’s much higher, particularly among young Spaniards. So Spain suffers a double whammy. All those unemployed people aren’t earning salaries and paying taxes, and all of them require social spending, which further hammers the poor Spanish treasury. And Spain, like Italy, can no longer borrow on the open markets because no one wants its bonds.


09:17 – This article, which focuses on one young formerly middle-class Greek family, makes clear how bad things have already gotten in Greece. The husband is a mechanical engineer who considers himself lucky to have occasional work picking fruit for €29.45 a day. His wife, a chemical engineer, finds occasional work selling toilets and flowers. They can’t afford to pay the rental for an apartment, so they’ve moved into his parents’ apartment, displacing his parents to the vacant shop next door. Even getting enough to eat is a problem. And they consider themselves lucky, because they’re in better shape than most. Greece is already well on its way to joining the third world, and it’s only going to get worse.


10:14 – As my regular readers know, I consider same-sex marriage to be a basic human right. The religious nutters would have us believe that allowing same-sex marriage would inevitably destroy society. Well, here are two married lesbians, Hege Dalen and Toril Hansen, who are rightly being acclaimed heroines in Norway. While the police dithered, these women took immediate action at severe risk to their own lives to rescue 40 of the kids on the island. They were having dinner on the mainland when they heard shooting and screams from the youth camp on the island. Most people would have called the police and considered their duty done. Not these women. They hopped in their boat, roared out to the island, and took a boatload of kids to safety. Despite the fact that their boat now had bullet holes in it, they returned to the island four more times, under fire, to haul off additional loads of kids.

If these women had been members of the US military, their actions would almost certainly have earned them the Medal of Honor, and would have made the front pages across the planet. As it is, this morning was the first I’d heard of it. Gay advocates are claiming, with apparent justification, that these women’s heroism has been downplayed because they’re gay. Well, to those who condemn gays and same-sex marriage, all I can say is fuck you and the horse you rode in on.

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