DJIA: 8718.85 +116.33 (+1.35%) S&P 500: 1079.27 +10.68 (+1.00%) Nasdaq: 1788.18 +16.52 (+0.93%) Value Line ndx 962.51 +6.34 (+0.66%) 30-Year Bond 103 22/32 +14/32 5.86% Yield
Dow Jones Industrial Average component J.P. Morgan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: JPM)") else Response.Write("(NYSE: JPM)") end if %> surged $5 1/8 to $130 1/8 after UBS Securities analyst Tom Hanley said in a research report today that the company "could decide to consummate a merger within the next twelve months." That's no news flash, as Morgan has kicked around a number of potential strategic moves under Chairman Sandy Warner, but Tom Hanley carries a good deal of weight with institutional investors. Rumor has it that Britain's HSBC Holdings is considering a takeover at $175 per share. Strategically, such a deal would make sense given the various core competencies of each company. In the meantime, J.P. Morgan is slimming itself down, selling off certain loans in securitizations of collateralized loan obligations, and concentrating on value-added services such as asset management and other securities functions. Following J.P. Morgan higher today was Chase Manhattan <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CMB)") else Response.Write("(NYSE: CMB)") end if %>, which gained $3 1/16 to $128 5/16, Bankers Trust <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BT)") else Response.Write("(NYSE: BT)") end if %>, which advanced $3 13/16 to $121 3/4, and Citicorp <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CCI)") else Response.Write("(NYSE: CCI)") end if %>, which tacked on $3 1/8 to close at $139 9/16.
Consumer services conglomerate Cendant Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: CD)") else Response.Write("(NYSE: CD)") end if %> raised its bid for American Bankers Insurance Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABI)") else Response.Write("(NYSE: ABI)") end if %> to $67 per share in cash or stock today, sending American Bankers $3 3/4 higher to $65 3/4. Cendant is offering to buy 23.5 million American Bankers shares in cash and pay $67 a share in Cendant stock for the remaining shares. The offer, totaling $3.1 billion, is about 15% higher than the $2.7 billion offer from international insurance concern American International Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AIG)") else Response.Write("(NYSE: AIG)") end if %>. The story began in late December when AIG announced that American Bankers had agreed to be acquired for $47 a share, or $2.2 billion in stock and cash. A little less than a month later, Cendant said it would make a hostile bid for American Bankers, taking the price up to $58 a share in cash and stock, or $2.7 billion. Early this month, AIG matched that by boosting its friendly offer. So far it is Cendant that is digging in its heels to acquire American Bankers for its credit insurance business, a specialty insurance niche that pays customer's bills in the event of death, disability, or unemployment. Cendant's existing distribution network will allow the company to easily market the credit insurance, but AIG would allow American Bankers to grow its international business more quickly.
Astea International <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ATEA)") else Response.Write("(Nasdaq: ATEA)") end if %>, which develops software for automating customer support, marketing, and sales operations, gained $1 15/16, or 79.49%, to $4 3/8 after announcing that telecommunications company Ericsson <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ERICZ)") else Response.Write("(Nasdaq: ERICZ)") end if %> will distribute and market its Abalon Customer Management Solution to call center customers worldwide. The Abalon CMS software will also be integrated into Ericsson's Consono Call Centre solution to handle customer management. Ericsson has 24% of the European market for customer support-related phone equipment. The fact that a much larger and better-known company than Astea will act as a distributor for its products is good news for the struggling software firm.
QUICK TAKES: Coca-Cola Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: KO)") else Response.Write("(NYSE: KO)") end if %> gained $1 3/16 to $71 3/4 after Warren Buffett said in his annual letter to shareholders of Berkshire Hathaway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BRK.A and BRK.B)") else Response.Write("(NYSE: BRK.A and BRK.B)") end if %> that the beverage company will be "the same steamroller under Doug [Ivestor] as it was under Roberto" Goizueta, Coke's CEO since 1981 who died last October... Pfizer Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PFE)") else Response.Write("(NYSE: PFE)") end if %> rose $2 1/8 to $88 amid expectations that the pharmaceutical company will get the green light from the FDA this month to market two of its new drugs -- Viagra for male erectile dysfunction and Zeldox for schizophrenia... HealthSouth Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HRC)") else Response.Write("(NYSE: HRC)") end if %> moved up $5/8 to $30 after The Wall Street Journal's "Heard on the Street" column reported that investors have been bidding up the chain of rehabilitation clinics and outpatient-surgery centers even as they bail out of other healthcare issues.
Applied Microsystems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: APMC)") else Response.Write("(Nasdaq: APMC)") end if %> leapt $2 3/4 to $8 9/16 after the hardware-enhanced embedded software designer announced that it has signed an agreement with Microsoft Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MSFT)") else Response.Write("(Nasdaq: MSFT)") end if %> to license and distribute the Microsoft Windows CE operating system... Insurance and reinsurance company Mid Ocean Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MOC)") else Response.Write("(NYSE: MOC)") end if %> shot up $10 3/8 to $73 11/16 after announcing that it will merge with competitor EXEL Ltd. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XL)") else Response.Write("(NYSE: XL)") end if %> in an all-stock transaction. EXEL currently owns 9.7 million, or 26.82%, of Mid Ocean's outstanding shares... CIENA Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CIEN)") else Response.Write("(Nasdaq: CIEN)") end if %>, which makes dense wavelength division multiplexing (DWDM) systems that allow optical fiber to carry more data, graphic, and voice information without requiring more lines, jumped $3 to $47 7/8 on announcing that telecommunications company Sprint Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: FON)") else Response.Write("(NYSE: FON)") end if %> will usen CIENA's 40-channel MultiWave 4000 scaleable dense wavelength division multiplexing system to increase the Sprint network's capacity by 250% (and ultimately by 600%).
Pharmaceutical, diagnostic, nutritional, and hospital products developer Abbott Laboratories <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ABT)") else Response.Write("(NYSE: ABT)") end if %> announced that it has entered into an agreement to acquire medical diagnostics company International Murex Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MURXF)") else Response.Write("(Nasdaq: MURXF)") end if %> in a cash tender offer valued at approximately $234 million, or $13 per share. The news sent International Murex up $2 to $12 11/16... Digital subscriber line communications systems maker PairGain Technologies <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PAIR)") else Response.Write("(Nasdaq: PAIR)") end if %> rose $1 1/2 to $20 5/8 after announcing an agreement with Rockwell Semiconductor Systems, a subsidiary of Rockwell International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: ROK)") else Response.Write("(NYSE: ROK)") end if %>, to license PairGain's discrete multi-tone asymmetric digital subscriber line (DMT ADSL) Falcon chip.
WorldCom Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: WCOM)") else Response.Write("(Nasdaq: WCOM)") end if %> jumped $2 11/16 to $41 7/8 after an influential analyst at Salomon Smith Barney gave the telecommunications provider a "strong buy" rating and said the stock would reach $60 in the next 12 months. Until recently, Salomon analyst Jack Grubman had been barred from commenting on WorldCom because his firm acted as a financial advisor to WorldCom in its planned purchase of MCI Communications Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MCIC)") else Response.Write("(Nasdaq: MCIC)") end if %>.
Scientists from Nymox Pharmaceutical Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NYMXF)") else Response.Write("(Nasdaq: NYMXF)") end if %> rocketed ahead $6 5/8 to $12 3/4 after announcing at a conference in New York that it believes it has found a major cause of Alzheimer's disease. The company has several new drug candidates in development that may eventually be able to slow or stop the disease... Bio-logic Systems Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: BLSC)") else Response.Write("(Nasdaq: BLSC)") end if %>, a designer and marketer of computerized medical electro-diagnostic equipment, added $13/16 to $5 3/8 after announcing it has received FDA clearance for its new Ceegraph 128 System for long-term epilepsy monitoring... Cable network Black Entertainment Television's parent BET Holdings <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BTV)") else Response.Write("(NYSE: BTV)") end if %> leapt $6 1/16 to $60 9/16 after announcing that it has agreed to a proposal from its founder, chairman, and CEO Robert L. Johnson and Liberty Media Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LBTYA)") else Response.Write("(Nasdaq: LBTYA)") end if %> to buy all outstanding BET common stock not already owned by them for $63 a share.
RATINGS UPGRADES: United Airlines parent UAL Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UAL)") else Response.Write("(NYSE: UAL)") end if %> took off, rising $2 7/8 to $92 5/8 after Morgan Stanley upgraded its rating on the company to "outperform" from "neutral"... Diversified manufacturer Minnesota Mining & Manufacturing Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MMM)") else Response.Write("(NYSE: MMM)") end if %> added $1 3/4 to $91 1/2 after Prudential Securities raised the company to a "buy" from "hold"... Morgan Stanley initiated coverage on HA-LO Industries <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: HMK)") else Response.Write("(NYSE: HMK)") end if %> with a "strong buy" rating, sending the promotional products distributor and telemarketing services company's stock up $4 1/16 to $34 1/8.
Zip and Jaz drive maker Iomega Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: IOM)") else Response.Write("(NYSE: IOM)") end if %> slumped $1 1/2 to $7 1/8 after announcing that its fiscal Q1 sales will be "relatively flat" compared with Q1 1997 revenues of $361 million. The company expects it will report negative cash flow and a loss of $0.04 to $0.10 per share for the quarter on April 16. The firm said sales through the distribution and retail channels slowed during the last part of the quarter. This is different from an inventory back-up, since the company is talking about sales out of the channel to consumers (which some very conservative companies report as inventory until sold to end users). Iomega is trying to get PC makers to include its drives as standard features in their PCs rather than selling them as aftermarket parts. However, as this is a lower-margin business than selling to aftermarket consumers, it will also affect near-term earnings. In addition, sales are slowing even though Iomega recently slashed the price of its external Jaz drive by 33%, perhaps signaling market saturation for its aftermarket drives.
Bone density measurement device maker Lunar Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LUNR)") else Response.Write("(Nasdaq: LUNR)") end if %> slipped $2 1/2 to $21 after saying that slower sales will lead to lower fiscal Q1 revenues than a year ago. Meanwhile, rival Norland Medical Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: NRLD)") else Response.Write("(Nasdaq: NRLD)") end if %> was crushed $2 3/16 to $4 7/8 after announcing that it will reduce and restate its revenues for fiscal 1996 and 1997. Not helping the companies today was competitor Hologic Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HOLX)") else Response.Write("(Nasdaq: HOLX)") end if %>, which added $1 1/4 to $29 1/2 after the FDA approved its new bone density device on Friday. Products from Lunar and Norland use X-rays to measure bone density in the spine or hip. Hologic's smaller ultrasound device, however, can take a reading from a patient's heel, which the firm feels is a simpler and more affordable method to test for osteoporosis. The condition, which causes bones to become weak and brittle, eats up about $14 billion in healthcare costs annually, according to the National Osteoporosis Foundation. With its new, non-radiation method, it appears that Hologic is now the front-runner in the race to capture the osteoporosis testing market.
Wireless communications firm 360 Communications Co. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: XO)") else Response.Write("(NYSE: XO)") end if %> slid $4 3/8 to $31 1/4 after the company agreed to be acquired by fellow communication services provider Alltel Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: AT)") else Response.Write("(NYSE: AT)") end if %> in a deal valued at around $4.2 billion. Under the agreement, each 360 share will be converted into 0.74 of a share of Alltel stock and Alltel will assume about $1.8 billion of existing 360 debt. The combined company will claim 5.6 million wireless, wireline, long-distance, and Internet customers in 22 states. The fact that the two companies have very little overlap in their field operations makes for an excellent strategic fit. The combined firm hopes to save $100 million the first year, primarily by eliminating redundant selling, general, and administrative (SG&A) expenditures as well as through network savings.
QUICK CUTS: Semiconductor process equipment supplier Mattson Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MTSN)") else Response.Write("(Nasdaq: MTSN)") end if %> lost $1 3/16 to $7 3/16 after saying that it expects a fiscal Q1 loss of $0.08 to $0.12 per share due to order cancellations from Asian customers. Analysts had been expecting a Q1 loss of $0.07 per share. The company said its Q2 earnings will also fall short of forecasts... Broadband access equipment company Hybrid Networks <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: HYBR)") else Response.Write("(Nasdaq: HYBR)") end if %> dropped another $5/16 to $6 1/4 after announcing on Friday that fiscal Q1 sales will be flat with Q4 revenues of $5.1 million because of weak demand... Automatic service and support software developer CyberMedia Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYBR)") else Response.Write("(Nasdaq: CYBR)") end if %> slipped $1/4 to $7 1/16 after shareholders filed a class action lawsuit alleging improper accounting for return reserves and issuing false and misleading financial statements.
Computer-related display projector maker In Focus Systems <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: INFS)") else Response.Write("(Nasdaq: INFS)") end if %> fell another $1 1/16 to $15 after saying on Friday that heavy competition is squeezing margins and forcing the company to cut prices... Retail pharmacy company Horizon Pharmacies <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: HZP)") else Response.Write("(AMEX: HZP)") end if %> fell $1 3/4 to $9 1/2 after reporting Q4 EPS of $0.03, which was two cents short of the estimate of the sole analyst surveyed by First Call... UCAR International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: UCR)") else Response.Write("(NYSE: UCR)") end if %> slumped $4 7/16 to $27 1/2 after the manufacturer of graphite and carbon electrodes said chairman and CEO Robert Krass and chief operating officer Robert Hart both retired... Semiconductor voice-record and playback technologies firm Information Storage Devices <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: ISDI)") else Response.Write("(Nasdaq: ISDI)") end if %> lost $1 1/8 to $5 7/8 after announcing on Friday that fiscal Q1 revenues will be about 20% below analysts' expectations due to postponed orders from a major domestic customer and reduced orders from a Japanese client.
Sonar products and orbital satellite receiver maker Lowrance Electronics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LEIX)") else Response.Write("(Nasdaq: LEIX)") end if %> fell $7/8 to $5 7/8 on reporting a fiscal Q2 loss of $0.09 per share versus a loss of $0.37 per share year ago... Cylink Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: CYLK)") else Response.Write("(Nasdaq: CYLK)") end if %> slid $1 3/8 to $13 3/4 after the provider of network security solutions sold its wireless communications division to wireless network access systems firm P-Com Inc. <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PCMS)") else Response.Write("(Nasdaq: PCMS)") end if %> for $46 million in cash and a $14.5 million note due 100 days after the deal closes... Information technology management software developer Platinum Technology <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: PLAT)") else Response.Write("(Nasdaq: PLAT)") end if %> slid $2 1/16 to $24 1/2 after agreeing to buy data modeling solutions provider Logic Works <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: LGWK)") else Response.Write("(Nasdaq: LGWK)") end if %> in a stock swap valued at about $175 million.
Oil services companies had a rough go of it today as the price of Brent North Sea crude oil sank to a new nine-year low of $12.37 a barrel. Smith International <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: SII)") else Response.Write("(NYSE: SII)") end if %> slid $2 5/8 to $50 9/16 and Cooper Cameron Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RON)") else Response.Write("(NYSE: RON)") end if %> slipped $2 9/16 to $55 7/16. Oil drillers were also down, as Transocean Offshore <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: RIG)") else Response.Write("(NYSE: RIG)") end if %> skidded $1 7/8 to $43 5/16, UTI Energy Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: UTI)") else Response.Write("(AMEX: UTI)") end if %> slumped $5/8 to $12 13/16, and Key Energy Group <% if gsSubBrand = "aolsnapshot" then Response.Write("(AMEX: KEG)") else Response.Write("(AMEX: KEG)") end if %> sagged $11/16 to $15 1/16... Genetic discovery systems developer Molecular Dynamics <% if gsSubBrand = "aolsnapshot" then Response.Write("(Nasdaq: MDYN)") else Response.Write("(Nasdaq: MDYN)") end if %> tumbled $1 1/2 to $13 7/8 after a division of life science systems and analytical instruments company Perkin-Elmer <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: PKN)") else Response.Write("(NYSE: PKN)") end if %> sued the company and Britain's Amersham Pharmacia Biotech UK for patent infringement... Fast food giant McDonald's Corp. <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: MCD)") else Response.Write("(NYSE: MCD)") end if %> slid $1 5/8 to $53 after Berkshire Hathaway <% if gsSubBrand = "aolsnapshot" then Response.Write("(NYSE: BRK.A)") else Response.Write("(NYSE: BRK.A)") end if %>, which is run by Warren Buffet, reported over the weekend that it had lowered its stake in the company by at least 16 million shares.
FOOL
ON THE HILL
An Investment Opinion
by
Jim Surowiecki
Clinton and the Market
When you consider that a rather respectable-looking and seemingly credible witness went on national television last night and said that the President of the United States was a perjurer, it seems at least a little peculiar that the Dow Jones Industrial Average and the Nasdaq both rose sharply today, that bond prices were up, and that investors seem more interested in the fact that Warren Buffett doesn't believe the stock market is overvalued than the fact that Bill Clinton may be a few steps closer to impeachment. At this point, would anything short of the news that Clinton was responsible for the Kennedy assassination shake the bullishness of this market?
To be sure, there are good reasons why both the stock and bond markets have shrugged off Kathleen Willey's allegations. In the first place, news of last night's 60 Minutes story actually broke on Friday. It took investors less than an hour to assimilate the news and decide that it probably didn't matter all that much. More importantly, as Friday's reaction suggests, investors -- both institutional and individual -- appear to have adopted the most sanguine stance imaginable toward all Clinterngate-related news. Clinton's firm denial that anything improper happened with Willey makes this a "he said, she said" situation as far as the markets are concerned, and means that Clinton's position is not significantly weaker than it was before last week. Finally, it's almost certainly true that the endless parade of witnesses before the TV cameras in the last two months has inoculated Clinton's reputation against anything but hard evidence -- such as a videotape -- of egregious conduct. Not until potential impeachment proceedings actually begin, it seems, will anyone begin to get worried.
What's really interesting, though, and what's really relevant in the long term, is that it's beginning to seem possible that even impeachment proceedings against Clinton would not necessarily derail the markets. In other words, investors' lack of concern about Willey's testimony may be the result not merely of their evaluation of its impact on Clinton's presidency, but also of their evaluation of Clinton's impact on the global marketplace and their recognition that even the President of the United States just doesn't matter that much anymore.
What, after all, would Clinton's departure mean? Al Gore would step in as president, which would be no difference at all, except for perhaps a tighter embrace of the high-tech industry and more pressure on the environmental front. Alan Greenspan would continue as head of the Federal Reserve Board, which is what bond traders and fund managers are really interested in, and Robert Rubin would either continue as Secretary of Treasury or would hand over the reins to Lawrence Summers. Either way, Treasury's commitment to the strong dollar and its active role in handling the Asia financial crisis would not waver. While a prolonged impeachment proceeding would almost certainly rock consumer confidence, which has been driving the economy's expansion, unlike Watergate -- which involved both a corruption of the electoral process and resulted in the demolition of the entire White House staff -- Clinterngate's ramifications don't seem to extend much beyond Clinton himself.
More importantly and more strikingly, the increasing globalization of the U.S. economy, and in particular of U.S. financial markets, coupled with the gradual shrinking of the size of government discretionary spending relative to the size of GDP (before the government spending component), means that Washington simply has less and less effect on the direction the economy takes. (Arguably, one can see the same thing in Japan, where state spending program after state spending program have failed to jumpstart the economy and may have actually prolonged that country's never-ending recession). The almost instantaneous reaction of the stock market to Alan Greenspan's slightest pronouncement shows that the Federal Reserve -- which has, after all, the ability to create money -- is still important, while Treasury's success at managing the dollar over the last decade and a half suggests that there are limits to the power of currency traders (though not many limits at all). But the fundamental determinants of economic growth and of business success -- cost of capital, inflation, tax rates, technological innovation, and infrastructure -- are not things that Bill Clinton is in a position to alter in significant ways.
It is worth remembering, of course, that Watergate coincided with the worst bear market of the last half century, during which the value of the Dow was cut in half. But the early 1970s also featured an oil crisis, rising inflation, and an historically unprecedented profit squeeze on U.S. corporations, all of which made U.S. equities less than attractive investments. In every respect -- falling oil prices, subdued or nonexistent inflation, and historically high profits -- this economy is a different one, and those differences are far more important than any putative similarities between Richard Nixon and Bill Clinton. In dismissing the possible effects of Clinterngate, investors are not whistling past the graveyard. Instead, they're looking at the things that really matter.
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