Experts say now is not the time to buy into index fund

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xxsocraticxx
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Experts say now is not the time to buy into index fund

Post by xxsocraticxx » Tue May 12, 2020 7:09 pm

so there are experts who suggest we put money into specific companies that people can't live without during this crisis. The companies named include those in biotech, cloud tech and to specifically name one example, Zoom. One big name expert out there who carries a moustache says now isn't the time put money in index funds.

What do you guys make of this?

The way i see it, if it is money you already have in index funds, you basically stick with you allocation and move on.

If it is new money, wouldn't you want to put money in that index fund that tanks instead of a specific stocks in biotech or Zoom which are expected to hold or even move up ? When things normalize you might end up making some money with the index fund, whereas it is kind of a toss up with specific stocks.

For regular folks like me who don't watch cnbc every day, who just want to get by by not making any mistakes, by the time I make any sense out of it, the pros have already bought Zoom and I would end up getting it a higher price.

What do you smart folks think?

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Re: Experts say now is not the time to buy into index fund

Post by whereskyle » Tue May 12, 2020 7:12 pm

xxsocraticxx wrote:
Tue May 12, 2020 7:09 pm
so there are experts who suggest we put money into specific companies that people can't live without during this crisis. The companies named include those in biotech, cloud tech and to specifically name one example, Zoom. One big name expert out there who carries a moustache says now isn't the time put money in index funds.

What do you guys make of this?

The way i see it, if it is money you already have in index funds, you basically stick with you allocation and move on.

If it is new money, wouldn't you want to put money in that index fund that tanks instead of a specific stocks in biotech or Zoom which are expected to hold or even move up ? When things normalize you might end up making some money with the index fund, whereas it is kind of a toss up with specific stocks.

For regular folks like me who don't watch cnbc every day, who just want to get by by not making any mistakes, by the time I make any sense out of it, the pros have already bought Zoom and I would end up getting it a higher price.

What do you smart folks think?
All of those companies are as expensive as they've ever been.
"I am better off than he is – for he knows nothing and thinks that he knows. I neither know nor think that I know." - Socrates. "Nobody knows nothing." - Jack Bogle

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Re: Experts say now is not the time to buy into index fund

Post by theorist » Tue May 12, 2020 7:12 pm

Unless you have specific and actionable knowledge that you think other people either don’t have or haven’t acted appropriately on, you should not do stock picking (except maybe in a fun account which is 5% or less of your holdings). Stick with index funds, or at least cheap broadly diversified equity funds.

Remember, there are many billion and trillion dollar firms paying others to spend their full work life trying to develop such specific and actionable knowledge. Don’t underestimate how little advantage you have over them.

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Re: Experts say now is not the time to buy into index fund

Post by geerhardusvos » Tue May 12, 2020 7:13 pm

xxsocraticxx wrote:
Tue May 12, 2020 7:09 pm
so there are experts who suggest we put money into specific companies that people can't live without during this crisis. The companies named include those in biotech, cloud tech and to specifically name one example, Zoom. One big name expert out there who carries a moustache says now isn't the time put money in index funds.

What do you guys make of this?

The way i see it, if it is money you already have in index funds, you basically stick with you allocation and move on.

If it is new money, wouldn't you want to put money in that index fund that tanks instead of a specific stocks in biotech or Zoom which are expected to hold or even move up ? When things normalize you might end up making some money with the index fund, whereas it is kind of a toss up with specific stocks.

For regular folks like me who don't watch cnbc every day, who just want to get by by not making any mistakes, by the time I make any sense out of it, the pros have already bought Zoom and I would end up getting it a higher price.

What do you smart folks think?
Nobody knows anything. Turn off the media and “news”

Put as much money as you can afford to each month into your asset allocation as stated in your written investment plan

Every month we are buying VTSAX with over half of every paycheck. Won’t stop doing so for ~10 years until we retire.
VTSAX and chill

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Re: Experts say now is not the time to buy into index fund

Post by bottlecap » Tue May 12, 2020 7:15 pm

So, if this stuff is already obvious to salespeople, er “experts”, how is this information already not priced in? How do you benefit if everyone already knows it?

The answer is you are being lied to. These experts aren’t experts. Proceed with extreme caution.

This is a great place to learn - poke around the wiki.

JT
Last edited by bottlecap on Tue May 12, 2020 7:15 pm, edited 1 time in total.

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Re: Experts say now is not the time to buy into index fund

Post by JBTX » Tue May 12, 2020 7:15 pm

I would suggest that the experts aren't.

They are suggesting that the market is incapable of identifying companies with less bright prospects and valuing them, so only buy highly profitable companies at high comparative valuations. All growth all the time. No value.

If you think you can figure this out better than the rest of the market then have at it.

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Re: Experts say now is not the time to buy into index fund

Post by Ferdinand2014 » Tue May 12, 2020 7:17 pm

xxsocraticxx wrote:
Tue May 12, 2020 7:09 pm
so there are experts who suggest we put money into specific companies that people can't live without during this crisis. The companies named include those in biotech, cloud tech and to specifically name one example, Zoom. One big name expert out there who carries a moustache says now isn't the time put money in index funds.

What do you guys make of this?

The way i see it, if it is money you already have in index funds, you basically stick with you allocation and move on.

If it is new money, wouldn't you want to put money in that index fund that tanks instead of a specific stocks in biotech or Zoom which are expected to hold or even move up ? When things normalize you might end up making some money with the index fund, whereas it is kind of a toss up with specific stocks.

For regular folks like me who don't watch cnbc every day, who just want to get by by not making any mistakes, by the time I make any sense out of it, the pros have already bought Zoom and I would end up getting it a higher price.

What do you smart folks think?
I would tune out the noise. I plan to continue to by a super low cost S&P 500 index fund. I plan to make zero changes.
“You only find out who is swimming naked when the tide goes out.“ — Warren Buffett

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Re: Experts say now is not the time to buy into index fund

Post by Triple digit golfer » Tue May 12, 2020 7:22 pm

ZZZzzzZZZzzz

I will keep buying.

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Re: Experts say now is not the time to buy into index fund

Post by Trader Joe » Tue May 12, 2020 7:25 pm

xxsocraticxx wrote:
Tue May 12, 2020 7:09 pm
so there are experts who suggest we put money into specific companies that people can't live without during this crisis. The companies named include those in biotech, cloud tech and to specifically name one example, Zoom. One big name expert out there who carries a moustache says now isn't the time put money in index funds.

What do you guys make of this?

The way i see it, if it is money you already have in index funds, you basically stick with you allocation and move on.

If it is new money, wouldn't you want to put money in that index fund that tanks instead of a specific stocks in biotech or Zoom which are expected to hold or even move up ? When things normalize you might end up making some money with the index fund, whereas it is kind of a toss up with specific stocks.

For regular folks like me who don't watch cnbc every day, who just want to get by by not making any mistakes, by the time I make any sense out of it, the pros have already bought Zoom and I would end up getting it a higher price.

What do you smart folks think?
What "experts" are you referring to? Any links?

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xxsocraticxx
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Re: Experts say now is not the time to buy into index fund

Post by xxsocraticxx » Tue May 12, 2020 7:30 pm

Hey Trader Joe.. you are my favorite store.

One "expert" is the gentleman with the moustache....Mohamed El Erian... he mentioned not putting $ in index funds at this time.
As for experts suggesting we buy biotech, cloud tech, etc.... seems to be everywhere.

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Re: Experts say now is not the time to buy into index fund

Post by rob » Tue May 12, 2020 7:34 pm

xxsocraticxx wrote:
Tue May 12, 2020 7:09 pm
...cloud tech and to specifically name one example, Zoom...
... and when Google publically opens it's SECURE, mature & integrated screen share [meet] in the next week or two - that will have no impact right? And when Facebook releases their announced equal - that will have no impact either? I mean neither of those monsters could wipe out a company like zoom with more features for free and neither has a strong customer base to heavily market a move away from zoom :-)

Stock picking is for the birds... An "expert" in this space is a ridiculous and meaningless label - look at their track record as a group.
| Rob | Its a dangerous business going out your front door. - J.R.R.Tolkien

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Re: Experts say now is not the time to buy into index fund

Post by JoMoney » Tue May 12, 2020 7:34 pm

I ignore any "expert" that claims market participants can beat themselves.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: Experts say now is not the time to buy into index fund

Post by epargnant » Tue May 12, 2020 7:35 pm

If an index fund is good enough for your current investments, it’s good enough for your new money. If you have enough knowledge/expertise to stock pick, go ahead & sell everything & buy the individual stocks.

You can probably guess what camp most Bogleheads are in...

The collective wisdom seems to be, continue with your plan. If you’re panicking, maybe dial down the risk a notch, but make it a permanent change.

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Re: Experts say now is not the time to buy into index fund

Post by mortfree » Tue May 12, 2020 7:35 pm

Tv ratings. That is all this is about.

Move along.

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Re: Experts say now is not the time to buy into index fund

Post by afan » Tue May 12, 2020 7:36 pm

"Experts" say "pay me a commission" or "pay me an AUM fee"

Beyond that, the details don't matter.
Last edited by afan on Tue May 12, 2020 8:29 pm, edited 1 time in total.
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Re: Experts say now is not the time to buy into index fund

Post by UpperNwGuy » Tue May 12, 2020 7:39 pm

Now is the best time to buy into an index fund. When the future is cloudy, own the whole market.

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Re: Experts say now is not the time to buy into index fund

Post by galawdawg » Tue May 12, 2020 7:53 pm

The hucksters/authors/talking heads don't recommend index funds. It doesn't profit them.

According to them, it is never a good time to buy index funds.

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Re: Experts say now is not the time to buy into index fund

Post by abuss368 » Tue May 12, 2020 7:54 pm

I always tune out the financial porn and noise.
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Re: Experts say now is not the time to buy into index fund

Post by Nate79 » Tue May 12, 2020 8:03 pm

Experts? What experts?

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Re: Experts say now is not the time to buy into index fund

Post by Monsterflockster » Tue May 12, 2020 8:07 pm

If you’re buying those stocks now you already missed the train.

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Re: Experts say now is not the time to buy into index fund

Post by nisiprius » Tue May 12, 2020 8:26 pm

You named one of those experts as Mohammed El-Erian. So go and check. Has there ever been a time when it said it was the time to buy index funds? It seems unlikely. Why? Because from 2007-2014 he was CEO of PIMCO, and now is a top executive of the company that owns PIMCO. PIMCO is a mutual fund company that offers no index funds at all, only actively managed funds. Do you honestly believe he would ever praise a product that can be bought only from his company's competitors?
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Re: Experts say now is not the time to buy into index fund

Post by birdog » Tue May 12, 2020 9:08 pm

Every year some experts say not to buy index funds, now is the time to go active and it’s a stock-picker’s market. And then every year Standard & Poor releases the SPIVA Scorecard and shows that passive beats active, yet again. The song is so old and wrong every time, yet some people still listen to it.

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Re: Experts say now is not the time to buy into index fund

Post by StormShadow » Tue May 12, 2020 9:11 pm

xxsocraticxx wrote:
Tue May 12, 2020 7:09 pm
so there are experts who suggest we put money into specific companies that people can't live without during this crisis. The companies named include those in biotech, cloud tech and to specifically name one example, Zoom. One big name expert out there who carries a moustache says now isn't the time put money in index funds.

What do you guys make of this?
I plan to do what this guy recommended:

Image

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Re: Experts say now is not the time to buy into index fund

Post by Kookaburra » Tue May 12, 2020 9:20 pm

xxsocraticxx wrote:
Tue May 12, 2020 7:09 pm
One big name expert out there who carries a moustache says now isn't the time put money in index funds.
I don’t trust big name experts with moustaches.

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Re: Experts say now is not the time to buy into index fund

Post by hidradenitis » Wed May 13, 2020 1:34 am

This is my Forrest Gump analogy. (I am not an expert, either by CNBC or Boglehead criteria, but this makes sense to me.)

You know the story (or if not, watch the movie.) Forrest Gump and his shrimping boat partner, Lieutenant Dan, ride out Hurricane Carmen while all other boats remain in harbor and are decimated. Bubba Gump Shrimp, unopposed by competition and benefiting from a bumper crop of shrimp, controls the industry.

Let's suppose you are an investor. Just prior to the hurricane your options are:

A) Invest with Forrest's competitors and lose all your money.
B) Invest with Bubba Gump Shrimp and become a millionaire.
C) Spread your investment around such that you own a little bit of everyone's shrimping company. After the hurricane, you will lose on each company that lost their shrimp boats, but you will also benefit from Bubba Gump Shrimp's success. You are less profitable than option B, but much more profitable than option A.

Here's the problem. Forrest didn't know that Lieutenant Dan had to make his peace with God by riding out the storm. For that matter, Lieutenant Dan probably didn't know he had to make his peace with God that night. Additionally, neither of them knew if they would survive the night.

And nobody in the industry knew if there was going to be a hurricane, where it would make landfall, or how bad it would be. Assuming that the investor is a degree of separation from the understanding of the decision makers in the shrimping companies, it's unlikely that the investor would know any better (and more likely, if anything, to be less informed.)

So knowing that the future is uncertain and that the success or failure of a company depends not just on management but also factors which may be out of control of the industry, not to mention the investor, the most pragmatic action is option C.

I invest in index funds for for several reasons, including low cost, ease of investing, and peace of mind. But the fundamental reason is that I am not sophisticated enough to predict the impact of Hurricane Carmen, and I don't believe the experts can either.
Last edited by hidradenitis on Wed May 13, 2020 1:41 am, edited 1 time in total.

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Re: Experts say now is not the time to buy into index fund

Post by mortfree » Wed May 13, 2020 1:37 am

^^^^

Forrest also invested in a fruit company - Apple

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Re: Experts say now is not the time to buy into index fund

Post by DonIce » Wed May 13, 2020 1:45 am

xxsocraticxx wrote:
Tue May 12, 2020 7:09 pm
so there are experts who suggest we put money into specific companies that people can't live without during this crisis.
When it comes to investing, there are no experts. The amount of knowledge needed to outperform the majority of so-called experts can be acquired in a few hours on the bogleheads wiki. In fields that have true experts, like physics or medicine, someone that is an expert has verifiable, repeatable, provable skill that can be demonstrated. When it comes to investing, that is not the case. The market predictions of someone who has spent their entire life studying the markets are no more likely to be closer to correct than the predictions of a mildly informed amateur.

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Re: Experts say now is not the time to buy into index fund

Post by grabiner » Wed May 13, 2020 9:19 am

xxsocraticxx wrote:
Tue May 12, 2020 7:09 pm
The way i see it, if it is money you already have in index funds, you basically stick with you allocation and move on.

If it is new money, wouldn't you want to put money in that index fund that tanks instead of a specific stocks in biotech or Zoom which are expected to hold or even move up ? When things normalize you might end up making some money with the index fund, whereas it is kind of a toss up with specific stocks.
Except for taxes and transaction costs, it doesn't matter whether money is new or old. If you have $100K already invested, and I just received $100K in cash, you and I will get the same future returns if we invest our money the same way today.

This is even more important for asset allocation decisions. If your $100K is 60% in stock, and that is right for your risk tolerance, then I should put $60K of my $100K into stock and $40K into bonds if I have the same risk tolerance.
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Re: Experts say now is not the time to buy into index fund

Post by Jack FFR1846 » Wed May 13, 2020 9:32 am

Should we continue to invest in broad based, low cost index funds?

Ancient Alien Theorists say yes.
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Re: Experts say now is not the time to buy into index fund

Post by FRANK2009 » Wed May 13, 2020 9:52 am

"Experts" have been saying "It's a stock pickers market" forever. Problem is almost no can do it better than the indexes can.

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Re: Experts say now is not the time to buy into index fund

Post by Dottie57 » Wed May 13, 2020 9:57 am

bottlecap wrote:
Tue May 12, 2020 7:15 pm
So, if this stuff is already obvious to salespeople, er “experts”, how is this information already not priced in? How do you benefit if everyone already knows it?

The answer is you are being lied to. These experts aren’t experts. Proceed with extreme caution.

This is a great place to learn - poke around the wiki.

JT
+1

A down market is a GREAT time to buy index fund shares.

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Re: Experts say now is not the time to buy into index fund

Post by abuss368 » Wed May 13, 2020 9:59 am

xxsocraticxx wrote:
Tue May 12, 2020 7:09 pm
so there are experts who suggest we put money into specific companies that people can't live without during this crisis. The companies named include those in biotech, cloud tech and to specifically name one example, Zoom. One big name expert out there who carries a moustache says now isn't the time put money in index funds.

What do you guys make of this?

The way i see it, if it is money you already have in index funds, you basically stick with you allocation and move on.

If it is new money, wouldn't you want to put money in that index fund that tanks instead of a specific stocks in biotech or Zoom which are expected to hold or even move up ? When things normalize you might end up making some money with the index fund, whereas it is kind of a toss up with specific stocks.

For regular folks like me who don't watch cnbc every day, who just want to get by by not making any mistakes, by the time I make any sense out of it, the pros have already bought Zoom and I would end up getting it a higher price.

What do you smart folks think?
I ignore the financial porn and noise. I just keep buying Total Stock and Total Bond. In the years ahead I know I will be happy and thankful I did.
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Re: Experts say now is not the time to buy into index fund

Post by CyclingDuo » Wed May 13, 2020 10:01 am

nisiprius wrote:
Tue May 12, 2020 8:26 pm
You named one of those experts as Mohammed El-Erian. So go and check. Has there ever been a time when it said it was the time to buy index funds? It seems unlikely. Why? Because from 2007-2014 he was CEO of PIMCO, and now is a top executive of the company that owns PIMCO. PIMCO is a mutual fund company that offers no index funds at all, only actively managed funds. Do you honestly believe he would ever praise a product that can be bought only from his company's competitors?
Not to mention...

Assets under management at Allianz SE fell 6.2% in the first quarter, as subsidiary Pacific Investment Management Co. recorded net outflows of €43 billion ($47.5 billion).

https://www.pionline.com/money-manageme ... llianz-aum
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Re: Experts say now is not the time to buy into index fund

Post by Clever_Username » Wed May 13, 2020 10:38 am

Experts at selling overpriced stock advice and active funds always say this.

The advice for buying specific sectors or companies that are needed during the pandemic seems to imply that the people at Goldman Sachs aren't aware of COVID-19. I don't want to take advice from experts who seem to believe that.
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Re: Experts say now is not the time to buy into index fund

Post by 1789 » Wed May 13, 2020 12:36 pm

Who is more expert than WB? He says buy SP500
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Re: Experts say now is not the time to buy into index fund

Post by Rus In Urbe » Wed May 13, 2020 12:50 pm

To the OP, the BH-way works for the vast majority of investors. John Bogle had it right. So, go with that.

However, do take into account your own timeline. And your resources. If you have another 20-30 years until retirement, have at it---keep buying indexes. If your timeline is more like 5-10 years and you are going to need the money, then, in such a volatile market, think about your AA. Makes sure that if you put money into the market now and it goes down for the next five years, you won't either panic or need to withdraw. Make d--- sure of that.

Vanguard's site has some good information, and I find their outlook postings sensible and valuable. For about the past year, those posts have raised the flag about expecting 3% returns in near future (and this was WAY before Sars-Cov19 erupted). So take that into account.

But no, don't buy individual stocks. I've been there, done that. For all the reasons listed upthread, the downside risk is too great.

Good luck. :beer Rus
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Re: Experts say now is not the time to buy into index fund

Post by petulant » Wed May 13, 2020 2:16 pm

Many other posters have very good information, but here's another one. Just because people are using a product more and the industry is growing doesn't mean the companies will actually have outsized profits. Oftentimes, a new, growing industry attracts multiple competitors who must compete for the inputs to that product to provide growth, and they don't end up especially profitable. It's a classic issue from the industrial organization field in economics.

For example, airlines have had issues with profits for many years even while flight numbers grew by leaps and bounds.

Another example is computers--Intel and Microsoft made a lot of money during the 2000s, but Dell, Compaq, HP, Gateway, and others struggled to earn as much profit since they were competing with each other.

The same will be true today. Software companies will compete for programmers and offer services for free. None of them except maybe Microsoft will earn a real profit on videoconferencing tech during the emergency. Microsoft might turn a profit, but only because it already bundled Teams into a lot of Office contracts.

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Re: Experts say now is not the time to buy into index fund

Post by MDfan » Wed May 13, 2020 2:31 pm

Nate79 wrote:
Tue May 12, 2020 8:03 pm
Experts? What experts?
People on TV apparently.

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Re: Experts say now is not the time to buy into index fund

Post by MDfan » Wed May 13, 2020 2:34 pm

"If it is new money, wouldn't you want to put money in that index fund that tanks instead of a specific stocks in biotech or Zoom which are expected to hold or even move up ? When things normalize you might end up making some money with the index fund, whereas it is kind of a toss up with specific stocks."

Am I reading this wrong, or do these two sentences directly contradict each other? Or are they just really poorly worded? I can't decide.

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