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If the stock market tanks bigtime what stocks or investments are you considering buying at some point


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I am the furthest thing from a stock market investor but realize that if one wants to try and make their money grow over time then being invested in good solid companies is one of the best ways to try and stay ahead of the ravages of inflation and loss of purchasing power. With all the recent turmoil in the stock market and uncertainty, I was wondering if folks are currently on the sidelines and maybe have cashed out some of their holdings, waiting for an opportunity to jump back into the stock market when they feel it is most appropriate. I do realize some investors take a buy and hold approach and the financial pundits say it is very difficult,  if not impossible, to time the market. I am interested in hearing about folks strategies for investing in the stock market. The last 10 years or so, after the financial implosion, it was quite easy to make money in the stock market but now it appears to be a whole different ballgame.  If the stock market does truly enter bear territory and, in a worst case scenario stocks tank 40-50% what will folks do? Do they have specific stocks or mutual funds or ETF's in mind?  What investments would they enter in to as to give them the best possibility to maximize their returns and how important is preservation of capital as one seeks to pick those stocks they deem to be winners going forward? Any info or advice or insight would be appreciated so as to give me some insight into investing. I know their are savy investors on board and it will be interesting to hear about their personal strategies for investing, as well as their recommendations for specific investments going forward.

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Market timing is difficult, last week's US market retreat may be just a correction and you may have missed the chance to buy, or the market may dive lower this week.

I don't see US market going down 40-50% anytime soon. US economy is growing -the reason why the fed is raising interest rate.

I am a fan of Index funds, VOO or VTI for example. Low cost and diversified.

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I've increased my allocation to infrastructure.  The high-ish income is sustainable and should rise with inflation.  I can then comfortably wait for the price to bounce back, which should only take a year or two.

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If one commits a regular monthly investment into, for example, a mutual fund, then one gets the benefits of dollar cost averaging; as the market drops then more units are allocated; when it rises, less units are allocated.  Over time, this averages out.  It is very difficult to "time" the market, so "time in the market" is probably more important, for the average investor.

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16 minutes ago, allanos said:

the benefits of dollar cost averaging

 

Sorry.  This is total bunkum.  All research suggests that you are, on average, better off investing in a lump sum as soon as possible, rather than drip feeding it into the market.  I have no idea why this myth is so persistent.

 

https://seekingalpha.com/article/4064825-myth-dollar-cost-averaging

https://www.marketwatch.com/story/the-fallacy-of-dollar-cost-averaging-2012-05-15

http://www.moneychimp.com/features/dollar_cost.htm

https://www.federaltimes.com/2015/09/28/the-myth-of-dollar-cost-averaging/

http://www.crossingwallstreet.com/archives/2010/11/dollar-cost-averaging-the-myth-that-wont-die.html

 

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Choosing individual stocks and doing it properly is a job for a trained analyst, not so much for a casual investor... you are best off with well managed mutual funds... and time heals all wounds.

 

I have just recently, before the mini crash, moved to 50% in cash... about 20% bonds 30% stocks... as interest rates are rising it is nice to have some unflinching income. 

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In a crash look for companies that are still performing well, pay a good dividend and have only been dragged down by market sentiment. These will always (nearly) recover and give you a good return over time.

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On 10/16/2018 at 4:51 PM, watgate said:

Any info or advice or insight would be appreciated so as to give me some insight into investing.

 It depends on what exact questions you're asking:

 

--What to invest in, or how to invest, if you're starting from scratch now with a big lump sum of un-invested funds?

or

--What are good choices to invest in with an existing portfolio, or if adding small amounts month to month?

 

Overall, good investment advice generally says to keep a mixed ratio of fixed rate/cash investments like CDs or bonds, along with exposure to the stock market.  When you're younger, the stock market ratio should be higher, like 80% or so. But by the time you've stopped working and in your 70s, the cash/fixed rate portion should become larger/the majority. That's just a general rule of thumb, and can vary in application on whether the person has other stable/reliable sources of income such as a private pension or government support.

 

In my case, I look to invest in quality companies with a long and stable history of paying increasing dividends, even and especially though big recessions, so-called Dividend Kings or Dividend Aristocrats. That way, I don't need to be concerned so much about the inevitable market selloffs and price corrections, as I'm not relying on SELLING shares to support my retirement, but instead, living off a growing stream of dividend income. However, I should note that when buying in the first place, I'm always conscious of my entry price, and make sure that whatever I'm buying is at an attractive price.

 

In the past 10 years, I haven't sold one share of stock from my entire portfolio to raise cash to provide my income. But I absolutely have been living off a good stream of dividend income to go along with my other income sources -- pension, CDs, bank interest, and hopefully eventually U.S. Social Security.

 

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14 hours ago, Oxx said:

Sorry.  This is total bunkum.  All research suggests that you are, on average, better off investing in a lump sum as soon as possible, rather than drip feeding it into the market.  I have no idea why this myth is so persistent

Every agent or middleman will suggest to invest this way (monthly "average"), because it's a golden goose in commissions, small but continuous. And many lazy/beginner investors will fall for it. Me included, a long time ago. It took me a year to wake up and open my eyes.

 

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15 hours ago, TallGuyJohninBKK said:

In my case, I look to invest in quality companies with a long and stable history of paying increasing dividends, even and especially though big recessions, so-called Dividend Kings or Dividend Aristocrats. That way, I don't need to be concerned so much about the inevitable market selloffs and price corrections, as I'm not relying on SELLING shares to support my retirement, but instead, living off a growing stream of dividend income. However, I should note that when buying in the first place, I'm always conscious of my entry price, and make sure that whatever I'm buying is at an attractive price.

You could have copied my "investment thesis" John! About 1 more year and I will retire with a portfolio with a 5 year average of 10% dividend growth. Dividends are reinvested now but will supplement my SS after I retire.

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My biggest investment  is in Vanguard High Dividend Yield ETF, VYM.

The fund pays about 3% dividend, about 1% more then VOO and VTI.

The fund price is about 20% lagging VOO and VTI  in 6 years, may not matter to others but I wish I had everything in VOO or VTI.

Outside of index ETFs, I am afraid to hand pick just a few high dividend companies to invest in, look at AT&T, 6% dividend is inviting but how far the stock price is lagging compared to S&P 500 in just 5 years. If I am unlucky I may pick a company that may disappear all together...

 

 

 

 

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A great thread, thanks for starting it.

TallGuyJohn has a reply that really resonates with me.

I have for the past 6 or so years used the low maintenance, broadly diversified, dont touch, low cost ETF strategy, with a mix of bond funds, gold funds and equity funds with geographic diversity (US/CDA/INTL).

In Jan of this year I sold out to cash, frankly mostly from just being confused as to how the market was behaving - and also because I was going on an extended holiday and felt better being on the sidelines while trekking.

As it turns out the 'timing' of that was good, there have been only a handful of days since the sell date, 17.1.18, where my portfolio would have been higher (I still track it as it was for this purpose). 

The concept of timing the market, or the fact you cannot, is one I find hard to conceptualize. To me, every time you inject funds, sell a stock/bond/fund etc to get cash, rebalance or whatever, there is a timing aspect to it - I feel that all investors, retail or otherwise, try to make these moves when they feel comfortable with the existing level of their instrument, and many if not most will change their timing unless they are against the wall (margin call or some personal calamity). So I think there is always elements of timing in peoples calculations - maybe its just my definition of it is not in line with others.

I would like to put a few questions out to the crowd as well on this topic. As mentioned, I went to cash/capital preservation in Jan, and so far it has worked out for me (assuming in the intervening time I would not have changed my portfolio, which is a sound assumption). Now I am looking to find my re-entry point and strategy. I currently have my funds largely in CAD, and with a brokerage house offshore as I am a non resident therefore can do so. 

I am looking at moving to a new bank, one that is an offshore branch of a big US broker, which offers very very attractive trading costs and lots of other valuable services (including their research). 

1. To make this change, I would have to convert all my cash to USD. Now it is almost all CAD. I wonder about this and if the time and the FX now is as good as it will get (about at the 90DMA as of yesterday). There are so many global factors that could influence the CAD/USD now, and lots of volatility. But the thing is I want to be ready to exercise my new investment plan - and to do so now the leading contender in terms of a new strategy would have me changing banks and therefore having to do the FX conversion now. Comments on that would be appreciated.

2. My new plan (the one I am leaning toward) involves a departure form the broad based, balanced, buy and hold, total return ETF strategy, and a shift to a more active one with a greater focus on dividend paying ETF's and specific stocks that are 'dividend aristocrats' as John called them. I am thinking this as in the past decade the move from active to passive has been huge, and the flood of cash and investors moving to it conjures up thoughts in my mind of Warren's "be greedy when others are fearful, and fearful when others are greedy". It seems everyone is rushing to the passive bandwagon, and that maybe now is the time to buck that trend and put more effort into evaluating some individual stocks and raising the risk factor in the hope of more return (including dividends). I am loathe to jump back in this week, as I feel there is more downside in the current market than upside, but want to get ready. Would like to hear others comments on this as well.

 

I have to mention I am lucky in that I have a friend here that is an active player and I have watched him have great success (along the lines of what John mentioned) since 2002, by being here in Thailand and taking time to watch the market (not working) and making some smart moves based on research - and with a strong bias to dividend payers. He has also basically lived since 02 and has a net increase in his total asset value, as he adeptly moved in the market and lived off mostly dividends - and some capital appreciation realized - key...he made it thru the 08 plunge, again by having strong dividend plays that did not cut the payouts, so he could ride out the drop in face value of his holdings. Watching this experience has been a major influencer on my new proposed strategy. I am not working now, so I have the time and I have the background to do the analysis, just rusty from not suing it, but I can get back up to speed I hope.

 

Buffet mentioned other things that have influenced me to date. His rule 1 of dont lose money, followed by rule 2, see rule 1, was a factor in driving me to be defensive in Jan. He has mentioned that there are times you need to be patient and let an overheated market cool down - and indeed BH is now sitting on a $100B+ pile of cash, as they say they see no value out there. Now $100B is hard to swing around - I should be bale to find some value soon with my much more modest pile of $.

 

Ok that was a long post - lol. Happy to hear any and all comments. Cheers

 

 

 

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On 10/18/2018 at 11:02 AM, Oxx said:

Despite the number of links which you have posted to support your "bunkum" comment, I wonder what your "real world" experience has been, if you have any.  My remarks were totally based on personal experience, and dollar cost averaging paid out handsomely for me, by, as I said, time in the market, and hence why I am confident in giving the advice which I did.

 

As to your advice to an inexperienced investor, to put a large sum of money into the market as soon as possible,  if the market tanks soon thereafter, that investor is going to feel pretty stupid; and so are you.  And they will need time in the market to recoup their losses.  The adage that the market goes up by the stairs and down by the elevator is a true one. 

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16 minutes ago, allanos said:

Despite the number of links which you have posted to support your "bunkum" comment, I wonder what your "real world" experience has been, if you have any. 

 

It's really a simple matter of logic.  On average, markets go up.  If you put your money in all at once you get all the "up"; if you drip feed it in you only get part of the "up".

 

It won't work every time, but it will work far more often than not.

 

(One could add that often stocks pay dividends higher than bank interest rates, so that's another plus for not drip feeding.)

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2 minutes ago, Oxx said:

 

It's really a simple matter of logic.  On average, markets go up.  If you put your money in all at once you get all the "up"; if you drip feed it in you only get part of the "up".

 

It won't work every time, but it will work far more often than not.

 

(One could add that often stocks pay dividends higher than bank interest rates, so that's another plus for not drip feeding.)

You have overlooked the most important point, which is what happens if the market tanks; there will be no "up", but a major "down"!  You would need stats to convince me that it will work more often than not.  And not all stocks pay dividends, especially ones that tank due to a heavy market down-turn.

 

Sorry - your argument is a specious one.

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21 minutes ago, allanos said:

You have overlooked the most important point, which is what happens if the market tanks; there will be no "up", but a major "down"!  You would need stats to convince me that it will work more often than not.  And not all stocks pay dividends, especially ones that tank due to a heavy market down-turn.

 

Sorry - your argument is a specious one.

 

The stats are in the articles I linked to. And of course it works "more often than not" - markets go up more often than not.  Quod erat demonstrandum.

 

And it doesn't really matter that much if there's a major "down".  Markets are surprisingly resilient and bounce back quickly.  Even with the crash of 1939, when markets lost over 80%, it only took a bit over four years for the markets fully to recover.

 

https://www.nytimes.com/2009/04/26/your-money/stocks-and-bonds/26stra.html

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28 minutes ago, Oxx said:

 

The stats are in the articles I linked to. And of course it works "more often than not" - markets go up more often than not.  Quod erat demonstrandum.

 

And it doesn't really matter that much if there's a major "down".  Markets are surprisingly resilient and bounce back quickly.  Even with the crash of 1939, when markets lost over 80%, it only took a bit over four years for the markets fully to recover.

 

https://www.nytimes.com/2009/04/26/your-money/stocks-and-bonds/26stra.html

Is this a joke?  You are suggesting that someone invests today, the "market" tanks, and they have to wait 4 long years to get back to where they started? What about the opportunity cost of lost interest over that period?  In reality, they will have lost further money in that time.

 

Yes, I accept that "markets" will probably rise over the long term, although it is not written in stone.  However, some of the stocks that are listed in these markets won't necessarily go up, and some of the quoted companies will actually go out of business altogether.  If you have invested in one of those, with your get in early with a big lump sum, you will have lost in excess of 100% of your original investment.

 

I say again to you: reasons that sound good are not the same as good sound reasons!

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6 hours ago, Thailand J said:

My biggest investment  is in Vanguard High Dividend Yield ETF, VYM.

The fund pays about 3% dividend, about 1% more then VOO and VTI.

The fund price is about 20% lagging VOO and VTI  in 6 years, may not matter to others but I wish I had everything in VOO or VTI.

Outside of index ETFs, I am afraid to hand pick just a few high dividend companies to invest in, look at AT&T, 6% dividend is inviting but how far the stock price is lagging compared to S&P 500 in just 5 years. If I am unlucky I may pick a company that may disappear all together...

 

 

VYM seems like a pretty good generic ETF dividend investment, and it's good that its expense ratio is 0.08%, which is low/reasonable. However, its 3% yield right now matches what's available in no-risk, FDIC insured bank CDs right now, so you kind of need to ask, are you being rewarded adequately for taking the stock market risk associated with an ETF vs. bank CDs.

 

For me, I try to do a bit better than that both with my average dividend yield overall, and also with my dividend growth rates.  Although, the individual things I hold are a mix of higher yield, low dividend growth holdings (like AT&T) along with more moderate yield, but higher dividend growth stocks, so hopefully they kind of balance out in the overall portfolio.

 

In looking at the top holdings in VYM, I own a lot of them individually, but not all, because some of those holdings don't fit with my investment preferences and focus. AT&T has been beat up lately because of the uncertainty over the outcome of the Time Warner merger, the debt associated with that, and the federal government's ongoing appeal of having lost their attempt to block the merger.

 

That said, AT&T is yielding more than 6% right now, has been paying a continuously increasing dividend each year for almost 35 consecutive years including thru multiple recessions, and certainly isn't going to be disappearing anytime soon. For those elements, I'm OK to pocket my 6+% percent and not worry much about the price fluctuations.

 

BTW, one other difference about VYM is that it's an EFT that focuses on dividend paying companies, but it doesn't necessarily rule out companies such as Intel or Chase that have cut/reduced their dividends in recent years (Chase, which cut its div from .38 to .05 in 2009, kept it there for 2 years, and didn't make it back to .38 until 2013), not raised them regularly (Intel), or may have very low dividend growth rates, the latter being an element that should help keep your return above inflation in future years.

 

BTW, AT&T is one of the top 10 individual holdings in VYM.

 

1420198022_2018-10-1920_12_20.jpg.12b2e62d5119ec168779af09ce3032cd.jpg

 

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1 hour ago, allanos said:

However, some of the stocks that are listed in these markets won't necessarily go up, and some of the quoted companies will actually go out of business altogether.  If you have invested in one of those, with your get in early with a big lump sum, you will have lost in excess of 100% of your original investment.
 

 

One of the basic and very important principles to investing is a person ought to be DIVERSIFIED, meaning not putting all or even a sizeable amount of their assets/investments into any one basket. In stock market portfolios, it wouldn't be unusual to limit one's holdings in any individual stock or other asset to say 2.5% to 5% of one's overall portfolio, meaning the portfolio would consider of 20-40 different holdings. Part of the reason for that, of course, is to protect against the unexpected and minimize any loss exposure.

 

 

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5 hours ago, kuma said:

2. My new plan (the one I am leaning toward) involves a departure form the broad based, balanced, buy and hold, total return ETF strategy, and a shift to a more active one with a greater focus on dividend paying ETF's and specific stocks that are 'dividend aristocrats' as John called them. I am thinking this as in the past decade the move from active to passive has been huge, and the flood of cash and investors moving to it conjures up thoughts in my mind of Warren's "be greedy when others are fearful, and fearful when others are greedy". It seems everyone is rushing to the passive bandwagon, and that maybe now is the time to buck that trend and put more effort into evaluating some individual stocks and raising the risk factor in the hope of more return (including dividends). I am loathe to jump back in this week, as I feel there is more downside in the current market than upside, but want to get ready. Would like to hear others comments on this as well.

 

There's a different way of looking at such things that isn't based on where the overall markets are at at any point in time. Because, typically, you're not buying the entire market. You're selecting and buying individual companies that have all kind of ranges of P/E (price/earnings) valuations, some above their historic norms, and others actually well below their historic norms, even when the markets are hitting highs.

 

So for me, regardless of the overall markets, if I can find a quality company that meets my investment criteria and that's currently trading at an attractive price relative to its P/E norms, then I'm likely to buy it with my dividend earnings, because I know I'm getting fundamentally good value for that particular holding, even if the overall market might tank at some point and pull my stock down with it, usually for reasons that have nothing at all to do with the inherent value of profitability of that company. Meanwhile, I'm content to continuing collecting the dividends while the markets gyrate.

 

That said, since you seem now to have answered my original question about whether you had a lump sum to invest or were looking to gradually tradition or re-allocated funds (you apparently now have a lump sum in cash), at this point in the life of the bull market, I probably wouldn't be rushing to invest all at once, and would take my time, picking values when I find them, and keeping my available cash funds in something earning decent secured returns like a ladder of gradually maturing CDs or something even more liquid.

 

That said, when the market tanked a week or two back, I had some available funds and used those opportunity to buy a couple stocks at pretty good prices. Of the couple companies I bought, a couple immediately rebounded to even higher prices, while a couple others have continued drifting downward. And since they're quality companies at good prices, I'll buy more in the future if the opportunity presents itself when I have available funds.

 

But if I had $100K sitting in a bank account last week, I certainly wouldn't have thrown it all into the market at once.

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Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX)

 

No Load. LOW maintenance fee 0.04% w/min investment of $10,000.

 

...if don't want to invest $10,000...same fund with slightly higher 0.14% maintenance fee for $3k min investment

Vanguard Total Stock Market Index Fund Investor Shares (VTSMX)

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Companies come companies go. You never know.

Index funds such as VTSAX VOO VTI VYM VIG offer diversification at low cost, to me that's important for long term investing.

Index funds should be the core of the portfolio, you may add others whatever suits you.

I won't be able to sleep well if my core investments consist of a few companies. I have 15% of my investment in growth stocks, my "funny money" is doing very well in the last few years but I am already worried enough 🙂.. AAPL, MSFT, AMZN etc may be i'll just sell them.

 

 

 

 

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2 hours ago, Thailand J said:

Companies come companies go. You never know.

Index funds such as VTSAX VOO VTI VYM VIG offer diversification at low cost, to me that's important for long term investing.

Index funds should be the core of the portfolio, you may add others whatever suits you.

I won't be able to sleep well if my core investments consist of a few companies. I have 15% of my investment in growth stocks, my "funny money" is doing very well in the last few years but I am already worried enough 🙂.. AAPL, MSFT, AMZN etc may be i'll just sell them.

 

 

 

 

If you own VTSAX...you already do own AAPL, MSFT & AMZN. They are the Top 3 largest holdings, respectively. Of course, there are over 3600 more stocks owned in VTSAX + some US Treasury Bills. 

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12 hours ago, TallGuyJohninBKK said:

 

There's a different way of looking at such things that isn't based on where the overall markets are at at any point in time. Because, typically, you're not buying the entire market. You're selecting and buying individual companies that have all kind of ranges of P/E (price/earnings) valuations, some above their historic norms, and others actually well below their historic norms, even when the markets are hitting highs.

 

So for me, regardless of the overall markets, if I can find a quality company that meets my investment criteria and that's currently trading at an attractive price relative to its P/E norms, then I'm likely to buy it with my dividend earnings, because I know I'm getting fundamentally good value for that particular holding, even if the overall market might tank at some point and pull my stock down with it, usually for reasons that have nothing at all to do with the inherent value of profitability of that company. Meanwhile, I'm content to continuing collecting the dividends while the markets gyrate.

 

That said, since you seem now to have answered my original question about whether you had a lump sum to invest or were looking to gradually tradition or re-allocated funds (you apparently now have a lump sum in cash), at this point in the life of the bull market, I probably wouldn't be rushing to invest all at once, and would take my time, picking values when I find them, and keeping my available cash funds in something earning decent secured returns like a ladder of gradually maturing CDs or something even more liquid.

 

That said, when the market tanked a week or two back, I had some available funds and used those opportunity to buy a couple stocks at pretty good prices. Of the couple companies I bought, a couple immediately rebounded to even higher prices, while a couple others have continued drifting downward. And since they're quality companies at good prices, I'll buy more in the future if the opportunity presents itself when I have available funds.

 

But if I had $100K sitting in a bank account last week, I certainly wouldn't have thrown it all into the market at once.

TGJBKK

Thanks for the comprehensive response. Your summary on Q#2 is more or less in line with my thinking now, so thats a tick in the plus column. I see there are no posters taking a shot at commenting on Q#1, - but I am pretty much convinced I will change banks and in doing so flip to USD as my primary currency. The fees to trade are so significantly lower, and the access to investment products so much more robust, that it seems that is the way forward. the ultimate currency play os THB, as I live here in Thailand so whatever currency I hold ends up in THB at some point - and between USD and CAD, the THB equivalent is the same ( a rounding error difference) so other than waiting for some external event that boosts CAD back up to parity - a commodity surge of some sort - I think I should go ahead. I am not prepared to wait a long time for such an opportunity.

Cheers

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