Covid-19: It is going to get UGLY…

6 Monthly Market and Economic Update –  14th May 2020

Peter Flannery CFP AFA

 

 

“If you have one economist on your team,
it’s likely that you have one more than you’ll need.” 

Warren Buffett

THE MARKETS

COVID-19

The above graph shows government responses around the world. 

Key points

  • COVID-19 contained in some countries, not so much in others
  • Global economic growth is in sharp decline
  • Unemployment is rising now
  • Central banks are responding, but will it be enough?
  • What is happening with currencies? 

 

Governmental responses around the world have been mixed; however, the spread of the Coronavirus has been slowed or contained by many countries.  It is a mixed bag, with the likes of America opening up its economy again as infections continue to rise.  Singapore, after having initially contained the virus, has seen the dreaded second wave emerge; although it looks to be in hand, hopefully. Then, of course, there is New Zealand, and so far, it looks as though we have contained the virus.

The prolific spread of the virus is interesting in that it appears to impact mostly on those older sections of the population, and in particular, those with other health conditions.  Indeed, the greater the number of health conditions, the greater the probability of death. 

Most governments have acted knowing that an uncontrolled spread of the virus would mean an overrun health system and medical crises not seen in recent times, and of course, to be avoided if possible.

The response from governments and scientists around the world has been spectacular, with significant funding thrown at the virus, along with massive research.  For example, the Milken Institute is currently testing approximately 200 treatments for the virus, along with 123 vaccines that are currently in development.  We have also seen Remdesivir being used already in hospitals as a serum to treat the symptoms of the Coronavirus.  Trials of Remdesivir show a 30% reduction in hospitalisation time required and an improved recovery rate as a result of this serum.  Of course, it is not a vaccine, which is a different thing.  Vaccines will take longer; however, as has been widely publicised, the research, testing and rolling out of a vaccine usually takes several years and so far, what would normally take many months, has taken only weeks in terms of what has been achieved in the development of both a serum and a vaccine. 

Then, once a vaccine is finally developed, it needs to be tested, which is a significant hurdle, slowing things down and then further, it needs to be rolled out and distributed.  Those two steps take time.  Meanwhile, countries, governments and individuals around the world will be living life in a slightly different way, with social distancing and other measures becoming a normal way of life.

The red chart on the left shows the US share market (the Dow Jones) over the last six months.  The green chart on the right shows the US share market (the Dow Jones) over the last five years.

 

The Coronavirus has seen share markets around the world decline and now the outlook for property prices is looking soft.  Remember, the share market tends to be a leading indicator and forward looking, whereas property tends to be a lagging indicator.  In other words, the impact on property prices is yet to be seen and is ahead of us. 

I have never seen a global lockdown like this before and yet the systems, whether they be social, economic or financial have been severely dented in some cases, which is only to be expected when you consider the almost total lockdown of the global economy.  Yet the rule of law among other systems remains intact.  We have not seen a breakdown of epic proportions.  Life goes on, although indeed, it is different – more for some than others. 

For example, share markets around the world continue to trade.  Sure, prices are down but of course, they would be under such circumstances.  The point here is that the markets, for example, are performing and behaving in a way that they should.  They are working just fine.  Lower prices too means better value for us as value/e-Biz Investors, so it is not all bad. 

Global share markets, as measured by the MSCI (all country world index) gained 10.6% over April and is down around 13.5% year to date.  The Australian share market (S&P ASX 200) increased by 8.8% over April (12.3% in New Zealand Dollar terms) to be down -16.3% year to date.  The New Zealand share market was also strong over April, increasing by 7.5% to be down -8.4% year to date.  The point here is that markets are doing what they do best, which is allow participants to trade in a safe and orderly fashion, with prices reflecting sentiment around COVID-19 – totally normal from a market operational perspective.

From an investment point of view, some investors may not be that keen on market prices declining so sharply. 

Remember though, the strong rise in share markets around the world over 2019 included unsustainable gains that have since been given up.  Where we are now is somewhere around fair value.  Markets generally are neither expensive nor cheap, although I am pleased to say that within the markets, there are opportunities.

 

Share Purchase Plans and Rights Issues

You will have seen a couple of share purchase plans emerge and there will likely be more as companies look to strengthen their balance sheets, in order to brace themselves for what is coming up. 

To be clear, any business that is shut down with no opportunity to generate any revenue cannot sustain that situation for too long. Unfortunately, small businesses, and those who are self-employed, are the most vulnerable in this situation because they do not have the resources to raise capital in the same way that larger businesses and corporations do.  Share Purchase Plans and rights issues are a mechanism to raise money for the business.  Some of those offers are better than others. 

For example, the Auckland Airport share purchase plan, which has recently taken place, is one that my clients and I were somewhat cautious about.  Longer term, it will likely be okay; however, short to medium term, there is a degree of uncertainty, all based of course around when a vaccine can be delivered to the global community, which is some way off – likely 2021. 

My concern about Auckland Airport, as you may know, as a value/eBiz Investor, was that the pricing was based around market sentiment and recent trading prices rather than the intrinsic value of the business. 

What I mean by that is that with an intrinsic value (based on our assessment at WISEplanning) of around $2.00 to $2.50, the strike price of over $4 was expensive.  It was expensive compared to the ability of Auckland Airport as a business to use capital. 

In other words, the performance of Auckland Airport as a business is well below the expectations of the market who are using traditional financial analysis to assess the value of the business, which excludes consideration for the economics and performance of the underlying business. 

The market analyses the stock; at WISEplanning, we analyse the business.  There is no need to be concerned as it will be okay longer term, all things equal, providing they get back to some sense of normality in the fullness of time, which would seem likely.  It is just a question of when?  A good example though of an overpriced share purchase plan. 

By the time you read this, the share purchase plan for Credit Corp will have been announced to the market and this, based on the assessment at WISEplanning, looks like a reasonable offer for shareholders when compared to, for example, the Auckland Airport offer. 

In other words, the ability of Credit Corp as a business to use its capital is more in line with the strike price for the share purchase plan (when compared to Auckland Airport).  In the near future then, if you are a shareholder in Credit Corp, you will receive the assessment from my office regarding the Credit Corp share purchase plan offer.

Perhaps the point of all of this is to suggest that the technology and the science around COVID-19, whilst not exactly a so-called ‘slam dunk’ but nonetheless is well advanced on where things were with previous virus infections.

Research and testing has been achieved in a matter of weeks, what, in the past, has taken months and years.  That is massive progress right there. 

This suggests that at some point, a vaccine will emerge and then it is just a matter of the testing and rolling it out.  Sounds simple but the testing and distribution will take many months. 

At that point, one would expect that markets being a leading indicator, will already be reflecting the stabilisation of the global economy and indeed will be looking at growth prospects in the future.  That is why it is important that we do not deliberate too much right now as investors, trying to gauge every detail of economic information that may come out over the next few months, when in the meantime, the markets may be looking right through it. 

I am not predicting the future but merely suggesting that markets and the economy are different and separate.  We are investors, not economists – aren’t we? 

 

The Global Economy

 It will look ugly soon

The above three charts show economic growth as measured by GDP, comparing the global economy, developed wealthy countries and less wealthy emerging countries. 

 

Economic growth and activity will not only slow down over 2020 but in fact shrink.  That is a tricky situation. 

In simple terms, it will mean some businesses, mostly small ones but some large, will fall by the wayside; debt repayments will slow down, causing further problems down the line; debt will increase for a number of mums and dads, many businesses and most governments around the world, taking global debt to new highs. 

In short, the global economy, in general terms, will take a step back rather than move forward. 

As is always the case, the impact down to a family, a person or a business, is different depending on how well positioned we all are prior to the event and to some extent, whether we are just unlucky enough to be in those industries like tourism and hospitality that are more affected than others, such as technology and services. 

There is always luck in the mix somewhere.  Still, preparation does not always work but never hurts. 

 

The slew of ugly data

The data coming out over the next several months will become increasingly ugly.  The real impact of the Coronavirus is in front of us all.  Conditions for many will become more difficult. 

At the same time, strong progress has been made in the lab. 

Billions of dollars around the world have basically been thrown at the Coronavirus, with a race in many laboratories around the world to come up with an effective vaccine. 

What is interesting is that the AIDS virus continues today.  Still has no cure but it is contained.  Although I am speculating when I say it, however, it would appear unlikely that with the funding and the effort currently going into a vaccine for COVID-19, that one does not emerge at some point – what do you think? 

Whilst making assumptions is not always wise, let’s just for a moment assume that is the case.  What does that mean?  From a market point of view, as I have said, the market, I believe, will respond readily to positive signs around any announcement about a confirmed vaccine for COVID-19. 

In the meantime though, increasing difficulty lies ahead but let’s not forget that governments around the world have been united in their support of their respective economy, injecting billions of dollars in many cases into the economy to keep things ticking over.  It is not a perfect solution; however, it is working so far. 

The question, of course, is how long is it going to take to get ‘there?’

 

Oil Prices Dive

The chart on the left shows oil prices tracking down since late January this year.  The chart on the right highlights the decline into negative oil pricing, not something we often see – if ever. 

With the global economy basically in lockdown, aeroplanes grounded and the global economy itself almost grounded, oil prices declined sharply and at one point, blew right through the zero line into negative territory.  This meant that oil companies were paying organisations to take oil off our hands because they were unable to store it and had significant excess production.  Put simply, there is no shortage of oil.  Indeed, there is a glut.  This glut may not last forever but is very real and a major problem for the world’s oil producers. 

 

The United States of America

 

Economic growth outlook

The above chart, somewhat anecdotal but useful in terms of offering a consensus for you around expected GDP estimates for the second quarter of 2020 in America.

Economic activity in the American economy will likely shrink in the second quarter of 2020 in America.  The real question is just around how much.  By the way this is big news on the economic front.

This is a measure of economic activity.  What matters most is jobs and business survival; however, we will take growth in certain sectors if we can get it. 

Although not ideal, and the impact will be sharp and significant, it is not the end of the world.  It will not be easy for some but will be manageable.  The importance of this number on the chart above is how the numbers look in the third and fourth quarter of 2020.  That is the real question. 

 

America – Unemployment

The above graph shows the unemployment rate from 1890 through April 2020

First, let me say that correlations between the unemployment rate now and The Great Depression in the 1930s do not guarantee a depression over 2020 and beyond.  Sure, unemployment is an indicator of difficult times ahead for any economy.  The sharp rise in unemployment in the US, as shown in the chart above, is significant. 

The flow on effect will also be meaningful and felt across the global economy, although more by those who are socially and economically challenged than others who perhaps are better off (and a bit lucky too).  Although we will need to wait and see, the unemployment number as shown on the chart above, may rise yet further in the coming weeks.  

 

USA – Government Response

 Generally, governments have two main policy tools at their disposal times of economic crises:

  1. Fiscal policy – this is how the central government collects money through taxation and how it spends that money; and
  2. Monetary policy – this is about how central banks choose to manage the supply of money and interest rates.

 

Central banks, like the US Federal Reserve, for example, are separate to the government and can make unilateral decisions around monetary policy quite quickly, whereas major fiscal (government) policy changes can take time to implement. 

Not unlike many central banks around the world, the US Federal Reserve is seeing interest rates at close to zero, so the opportunity to continue slash rates to help offset a slowing economy is reducing quite a lot.

The above graph shows federal reserve interest rate moves since 2005.

During the first federal open market committee (FOMC), cut the target rate from 1.5% to 1% and then not long after, the rate was chopped a significant 1 percentage point, taking the rate close to 0%.  This brings us to Zero Interest Rate Policy (ZIRP) and Negative Interest Rate Policy (NIRP). 

The above image explains the difference between ZIRP and NIRP.

So, with interest rates sitting at around zero, the next move for central banks is to consider negative interest rates.  This approach is considered a reasonably bold move by some, as well as being experimental with unknown risks and potentially unforeseen consequences.  So, what this means is that with some central banks around the world getting close to exhausting traditional measures, their attention is now shifting to unconventional measures known as Modern Monetary Theory (MMT). 

In simple terms, what we have is a shutdown of the American economy in line with the shutting down of the global economy and a strong response by the government and the US Federal Reserve.  There will be an increasing ground swell of progressively ugly economic data emerging. 

In particular, the unemployment number, already big, is potentially looking to be huge; however, the US Federal Reserve has stated many times that it will respond doing whatever it takes to keep the economy tracking along until such time as it gets back on track again in the future. 

 

China

The above chart shows slowing industrial output (the orange bars at the top), the producer price index (the green line) and economic growth, as measured by GDP (the blue line).

China, sometimes known as the world’s factory, is re-opening and appears to have the spread of COVID-19 under control even though there was a small outbreak in Wu Han recently. 

Still, social distancing measures apply, which slows down their progress toward a consumption based economy (away from a manufacturing based economy).  Also, China trades with the likes of the US, Europe and other countries, and whilst their economies are in lockdown, China may have difficulty exporting goods to those countries. 

China therefore is not able to import some of its components that it needs for manufacturing, nor does it have demand for its products to any great extent right now.  By some estimates, the Chinese economy could see economic growth over 2020 slow to around 2%, quite a bit lower than its previous projection at around 6% in ‘normal times’. 

Many are hoping that Beijing will implement a significant infrastructure stimulus, which could potentially trigger another commodity boom along the lines of what happened after the global financial crisis in 2009. 

Although the spread of the virus is largely in hand, there are some new locally transmitted cases that are still being reported, so school openings, for example, have been postponed in China.  Cinemas are also closed again after briefly re-opening.

There is some evidence that around two-thirds of the working population are back at work; however, economic activity is slowed by containment measures, such as for example, ongoing quarantine measures if travelling beyond their city of residence and again on return.  Anyway, there are other suggestions that the output in China will recover significantly over the second quarter and continue over the third and fourth quarter of 2020. 

 

Europe

Economic Contraction/Growth Estimates over 2020 and 2021

The above graph compares what is mostly economic contraction over 2020 with a projected return to economic growth over 2021. 

The above chart shows a current and projected unemployment rate over 2020 and 2021. 

Some countries are affected more than others, with Spain and Italy unsurprisingly outpacing other countries in terms of a surge in their unemployment rate. 

Italy, for example, has seen its unemployment rate surge up from 14.1% last year to a bit over 20% for 2020, according to the International Monetary Fund.  The increase in unemployment for the likes of France, Germany and the UK are lower but nonetheless, they will have some impact on their respective economies.  According to IMF projections, 2021 may see unemployment rates return back closer to pre-COVID-19 levels. 

I suspect the rate of normalisation may spike initially, as Europe gets back to work but may see the improvement line slow down quite a bit as some displaced workers need to retrain or look elsewhere because their previous employers have been significantly compromised or no longer exist. 

The European Central Bank continues to ramp up its measures to cushion the European regions impact from COVID-19.  Like other central banks, they have lowered interest rates, offered new credit lines to banks and have added another €750 billion in bond purchases to the existing stimulus package. 

This is useful to help protect the European economy and also helps maintain financing costs for heavily indebted countries such as Italy, a country also one of the hardest hit by the COVID-19 outbreak. 

Interestingly, the European Central Bank has relaxed restrictions for banks which effectively means that they (the banks) are not so pressed to restrict their lending practices in order to maintain their own finances in good order – desperate times call for desperate measures! 

European economic contraction is a certainty.  Recent data from France and Italy showing both countries fell into recession as defined by two consecutive quarters of economic contraction.  The French economy, contracted by 5.8%, which appears to be the largest economic contraction for France since statistics began in 1949.

Tough times ahead for the European economy, although their system is mature and should be able to navigate the choppy waters of COVID-19 until such time as a vaccine comes to the rescue. 

 

The UK

The above graph shows economic activity from way back to 1700 right up to 2020. 

Here is another one: economic activity expected to shrink by 14% over 2020 – significant whatever way we look at it.  Statistically, this is the largest annual decline on record since statistics began back in 1949 and the sharpest contraction since 1706 (according to reconstructed Bank of England data going back to the 18th century); however, growth in the UK economy is expected to rebound in 2021 to 15%. 

Still though, the size of the economy is not expected to get back to its pre-COVID-19 peak until the middle of 2021. 

Notice how the more you study the economic impact of COVID-19, the more clear the trend.  Like many other countries, the UK also is seeing COVID-19 flush itself through the population, closing businesses and keeping workers at home, shutting down the economy almost overnight. 

Although it may feel like a long time in our respective bubbles, a few weeks, indeed three or four months, is not a long time in the overall scheme of things.  That is roughly how long it appears to be taking for the virus to be contained to some degree and for lockdowns to be slowly relinquished in favour of greater activity. 

Sure, it is a mixed experience from one country to another; however, that is generally what the trend looks like – same for the UK.  A return to so-called normal will be a slow journey, taking place, in my opinion, throughout 2021 and into 2022. 

To be clear, that is from an economic perspective and this information is not necessarily correlated to what may go on across the markets and I can guarantee you will not relate individually to every specific business within the markets.  Do you know what I mean?

The above chart shows the steady decline in unemployment up until COVID-19 and a projected sharp increase and then a reasonably sharp decline in unemployment back close to somewhere near levels prior to COVID-19 by around 2023. 

Pretty much the same story as in other countries and in the UK’s particular circumstances, the unemployment rate is expected to climb above 9% this year from the current rate of around 4%.

The above chart shows the current and projected movement in the inflation rate in the UK.

Interestingly, in the UK, the central bank’s latest financial stability report suggested cautious consumers will impact on rising prices but also levels of inflation are in line with a projected 16% decline in house prices. 

It will be interesting to see whether house prices decline by that much and unemployment is one of those drivers that could indeed make it happen.  As an aside, I suspect that UK home owners and property investors are a bit like Kiwis, in that property is a religion rather than an investment, so they initially at least may stubbornly hold onto their property rather than relinquish it at a price that they believe is not fair (even though fundamentally prices in the UK (the same in New Zealand) are very expensive by a number of measures.  The point here is that expensive prices have the furthest to fall when the market decides to give up. 

Anyway, the same as in other countries, in the UK, significant declines in spending on hotels, entertainment, restaurants and airline fights is contributing to economic slowdown.  By some measures, shopping at high street retailers has dropped by around 80% and of course, as expected, business confidence has been described as severely depressed – no wonder. 

To me, a recession in Britain is a certainty; however, depression whilst possible, is not probable. 

 

Australia

 Australia – Economic Activity

The above graph shows economic activity, including the projected contraction and return to growth up to 2021.

The Australian economy will move into recession more than likely, along with most other countries around the world over 2020.  Then, like many other countries, it is projected that Australia will exit from recession back into economic growth. 

Of course, like most other countries too, economic contraction of, say, 6% means that we need a bit more than 6% to get back to where we were.  To be clear, economic growth of 6.11% over 2021 is a catch up from 2020. 

This is important for us in New Zealand because Australia is one of our main trading partners, but not only that, there is strong talk of an economic/trading bubble between the two countries soon.  That arrangement is likely a month or two away.  It is fortunate for us that Australia has managed to contain the virus so that we can engage in mutual trade to help each other.  Ironically, New Zealand has much more to gain than Australia (because we are much smaller than Australia).  Still, they will want to participate.

The above chart shows the movement in the unemployment rate in Australia.

According to the International Monetary Fund (IMF), the Australian economy may grow by 6.1% in 2021, which would generally mean the unemployment rate should decline by about 1.5%.  However, it predicts the unemployment rate may actually rise another 1.3% to 8.9%.  So, while production in Australia may kick back in and mining production may again get moving, labour heavy sectors, such as hospitality, retail and tourism may be much slower to return to where things were only a matter of three months ago. 

That means support by the government and the Australian Reserve Bank, like a lot of other countries, will need to be carefully thought through as the recovery in unemployment will be uneven and could be slower than expected. 

In other news, both interest rates and inflation remain low in Australia, further held down, of course, by the Coronavirus and the economic impact. 

Like many other countries around the world, interest rates and inflation in Australia will likely remain subdued through 2020. 

House prices struck a speed bump over the last 12 to 18 months and were starting to recover; although it is difficult to see why house prices in Australia will recontinue to rebound strongly in the foreseeable future. 

Remember, of course, that there could well be, as the Aussies say, “Some legs in the property market” in the short term; however, as a lagging indicator, one would expect the pressure of slowing economic activity to weigh reasonably heavily on house prices, as consumers remain cautious and businesses struggle generally to achieve strong growth or anything like that. 

Like in many other countries around the world, for Australia, their economic system is developed, so they will be able to navigate their way through the choppy waters of the Coronavirus; however, for some individuals and many small businesses, plus a few large ones, it is a case of survival and getting through the next few months, one day at a time. 

 

New Zealand

Prime Minister, Jacinda Ardern, and Director of Health, Dr Ashleigh Bloomfield – the winning team. 

I continue to believe that, thanks to the efforts of Jacinda Ardern, Dr Ashleigh Bloomfield and their team, New Zealand is largely on the right track.  We can always debate whether we should go to level two sooner or later; however, what matters is that we contain the virus and function as an economy as best we can until a vaccine is available. 

I believe Kiwis are enterprising and innovative and that we will find ways to make it work.  It will not suit everyone and indeed, there will be those who unfortunately are collateral damage one way or another.  It is just the way things are – nobody’s fault. 

If you are feeling starved of detail around the New Zealand economy, just scroll down the chart above – it tells an interesting story.

The Coronavirus is contained but certainly not eradicated or eliminated.  New Zealand is a good place, particularly compared to many other countries; although the challenge we face is that, given tourism was one of our largest income earners and that is no longer an option, we need to think about how we are going to operate as an economy immediately.  The dairy sector appears to be doing okay, although prices could be volatile. 

The above two charts show the movement in global dairy prices.

Dairy prices declined by 1.6% in April and currently sit at around 10% lower than 12 months ago.  Skim milked powder prices are down around 6.6% with whole milk powder back 3.3%.  Interestingly, the price of New Zealand sourced cheese and butter remains firm, although this is not the case in other parts of the world. 

Interestingly, the ANZ World Commodity Price Index fell 1.1% in April, with the index now having fallen 9% over the past year.  One would expect further declines in the immediate future as the impact of the Coronavirus continues. 

The above chart shows employment intentions and employment growth in New Zealand.  ANZBO = the ANZ Business Outlook.  HLFS employment growth means Household Labour Force Survey. 

I imagine not much explanation is required for the chart above.  The short of it is that the full impact on employment in New Zealand from the Coronavirus is in front of us in the immediate future.  It will be significant; however, the government and its army of advisers and analysts will be aware of what is coming and looking to continue with measures that are already in place, I imagine. 

The alternative creates a bigger problem, which is why ongoing support from the government and the reserve bank is an important part of the recovery recipe. 

Like elsewhere, interest rates and inflation remain low and will remain low, I imagine, for the rest of 2020.

To Summarise

Okay, so it is no longer ‘steady as we go.’

From an economic perspective, we are seeing economic growth around the world not only slow down but contract sharply and significantly, interest rates lowered yet further, significant support packages from governments and central banks around the world, with America just announcing 20 million people unemployed. 

The Coronavirus has been contained to a greater or lesser extent in many countries, although America, with all its resources appears decidedly flat-footed (you might have your theories on this one?).  On the other hand, China has made solid progress, although as we are seeing there, recovery is slow and uneven. 

From an economic perspective, the worst is yet to come.  For some, it is not going to be easy, some are relatively unaffected whilst others, unfortunately, as I mentioned elsewhere, will become collateral damage. 

It is fair to say that humans, governments, businesses and everyday people are on the back foot at the moment. It will not stay that way.

Significant funding has been dedicated to science and research, in the hunt for a serum and a virus vaccine.  We already have more than one serum, Remdesivir, which has shown promising signs of managing some of the symptoms of the virus for some people. 

A vaccine is likely many months away and more than likely, we may not see the vaccine until 2021. Until then, there is no mystery in terms of what we all need to do.

From a market perspective, we have already seen trading prices decline sharply and partially rebound.  Right now, trading prices generally represent fair value and whilst they are not easy to find, there are nonetheless investment opportunities available with prices at current levels. 

Anyway, as I mentioned, as investors we have given up some unsustainable gains out of 2019, which leaves most portfolios back where they were around 12 to 15 months ago – not bad.

I know some wonder whether or not we are heading for a share market collapse and economic depression.  I do not know the answer.  Still, when you look at the evidence, it is difficult to see why a recession would be allowed to occur, given the strong government and central bank determination to manage economies through the choppy waters of the Coronavirus. 

As I have mentioned many times in the past, China will do whatever it takes to manage their economy. 

The central banks in both America and Europe have stated, on many occasions, that they too will do whatever it takes.  Don’t worry about the growing level of debt; it is not ideal, but it is not the beginning of the end for the global economy like some predict.  Why would it be – seriously?

People want to get back to work and provide for themselves and their families. Those that are self-employed and in business want to get back to their passion and adding value to their customers.  Scientists want to come up with a COVID-19 vaccine.  Governments want the people they serve to be safe and secure, and vote them back in again! 

There is uncertainty and risk.  Still, we have a lot going for us.

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