I had a conversation with someone the other day about the growing regulatory burden on financial institutions, specifically those instituted by the Securities and Exchange Commission in their oversight of Registered Investment Advisors (RIA’s). These rules range include many that are logical and obviously beneficial (a regulated custodian bank has to deliver a statement of holdings and activity to clients every quarter) and some that are extremely cloudy (try to find the exact piece of statute, rule or guidance that tells you whether or not you can provide a client with performance data on their own accounts that is gross-of-fees.) My guess is that the industry will tell you that they are over-regulated, and some in Congress (like Elizabeth Warren) will tell you that they are under-regulated.
I’m not going to touch that at all, because it isn’t my point here. My point here is that politicians have a nasty habit of demanding that others are held to a higher standard than those to which those same politicians are held. To do so, we are going to take a little spin through an imaginary world that I am going to call “The land in which politicians hold themselves to the same standards that they insist Investment Advisors meet." {Side note: work on a snappier name for this fantasy land. Other side note: you can’t be advisors and advisers, people, pick one and go with it.} First of all, let’s talk about why this is a reasonable exercise. RIA’s are regulated because they are in the business of providing advice and guidance to investors, and because such a service is of extreme importance to a massive number of Americans. Clearly, our elected officials do work that is of at least equivalent importance, and in fact, they administer an even larger portion of the wealth created by most people than do Investment Advisors. Between Federal and State income and payroll taxes, property taxes and miscellaneous sales and other taxes, the average American probably pays something like 20% of their gross income in taxes every year. With our current National Savings rate of only 5.7%, RIA’s handles barely a quarter of the assets that elected officials do. All of which is my way of saying that it is not outrageous to suggest that we hold our elected officials to the same standards that we hold our investment advisors. Now, then, let us walk through some of the major pieces of RIA regulation and see how that might stack up in a political world. Conflicts of Interest This is a big one, and sort of encompasses a bunch of other rules. Basically, the rule acknowledges that Advisers will always have circumstances in which their interests conflict with those of their clients, and they are required to a) disclose those conflicts, and b) describe in detail what steps they have taken to ensure that the interests of their clients are always put ahead of their own. There is a specific format, and a required disclosure document called an ADV form that must outline these conflicts. Some common examples include:
In politics, there are certainly some requirements to disclose conflicts of interest, most notably in contribution filings. Candidates must disclose the names of anyone who directly gives them more than a certain amount of money. Those disclosures include the donor’s employer, which creates at least some industry-level conflict data. That is certainly helpful, but the requirements are nowhere near those placed on advisors. For example, if a Senator were forced to file an ADV, it might include a sentence like “The Senator accepts contributions from Political Action Committees controlled by lobbyists. In some instances, the Senator may take action up to and including the introduction of legislation, specifically designed to promote the interests of those people represented by those lobbyists.” And if that sentence doesn’t appear in the politician’s ADV and he then (like, for example, Harry Reid did) takes $68,000 from Jack Abramoff in exchange for asking the Department of the Interior to reject casino applications that would compete with Abramoff’s Native American clients, why the Political-SEC would fine him. Or, if it were egregious enough, they might bar him from public office. Pay to Play The SEC has some new and pretty strict rules on employees of RIA’s moving back and forth between the public sector and the private sector. If, for example, an RIA hires an employee who worked for any municipality, the firm cannot bid on business from that municipality (which applies to the management of pension assets of that city or state, for example) for a period of at least two years. {There may or may not be rules related to political contributions as well, but I am not clear on that}. There is no rule that works the other way, and politicians are free to hire friends and family or donors or other benefactors at will. Heck, while we are on the subject, it’s probably worth noting that companies can hire the friends and family of politically-connected people without disclosure or repercussion. I mean, you didn’t really think McKinsey was going to hire Chelsea Clinton on her own merits, did you? Performance and Marketing Oh, this one is a doozy! The rules around advertising are incredibly strict, and violation of those rules comes with big and nasty consequences. In the simplest terms, an Advisor that advertises its investment performance (“We have earned 8% per year over the last ten years!”) has to calculate that performance according to established rules of calculation. They also must disclose, in detail, exactly how they calculated that performance, including the policies for including or excluding accounts from the calculations, what assets are counted, how they are counted, how you measure the impact of advisory fees, etc. What’s more, they have to provide an objective benchmark of that performance to measure their own results against. And, they need to maintain detailed records so they can re-create that performance record for as long as they use that record in any advertising. You’re already laughing at the idea of Politicians having to report their performance under objective, measurable and auditable standards. Heck, they created any entirely phony kind of accounting that no one else would ever be allowed to use just so that Social Security masked the annual deficits for about 25 years. “I once ran a marathon in about 3 hours.” Donald Trump says he created thousands of jobs and paid hundreds of millions of dollars in taxes. He definitely can’t say the first because it isn’t a verifiable claim, and he can only say the second one if he has used some accepted method to specifically calculate exactly what he has paid and can reproduce the calculation. Hillary Clinton says she “won health care for 8 million children” and “Every piece of legislation that I introduced in the Senate, just about, had a Republican co-sponsor.” Well, the first one is a no-go because it is misleading – she lobbied for it as first lady, but only Congress could actually pass that law. The second one is just straight wrong (Politifact calculated 30%). So, again, both of you are going to get a findings letter from the Political-SEC, and frankly, you both lie enough that you’re going to get fined and I don’t see much hope for either of you being allowed to participate in the industry any time soon. Forward-Looking Statements RIA’s are not allowed to make any speculative forward-looking statements that promise any specific results to any clients under any circumstances. You can’t promise to earn someone 5% per year, and you can’t guarantee anyone’s investment, and you’re almost certainly going to get shut down if you try. Politicians, though, are encumbered by no such rules! “Your premiums will go down by $2,500” turned out to be as preposterously stupid as it seemed at the time, but that doesn’t even matter…even if it was true, if we treated politicians like Investment Advisor’s, he simply wouldn’t be allowed to say it. Trump is promising 25 million jobs and 4% growth. Clinton is promising 10 million and says Trump will lose 3.4 million. Sorry guys, you are going to have to clam up about that…or else you’re gonna be banned! Insider Trading 60 Minutes did a piece on this a couple of years ago, which caused outrage for a day and promises from Congress to enact immediate change. They, of course, did nothing. And why would they? After all, while RIA’s (and really everyone else) are strictly forbidden, under penalty of jail, from trading on material, non-public information, Congress is welcome to invest based on their own knowledge of upcoming law changes without oversight. Are you a Senator on the Energy Committee who thinks that a sweeping new solar subsidy is going to get passed? Feel free to buy all the solar stocks you want, and then cast your own vote and lobby for those of your fellow Senators to finalize said law. After your portfolio increases in value based on this information, you are free to go ahead and cash in! If you are an RIA that hears about this though, you best not make any investments in solar on behalf of your clients…that, of course, would be horribly illegal. Remember up top where we talked about allocation of investments? Well, brokers have some leeway on which investors they give those shares to, and take a guess which accounts get outsized allotments of IPOS? Hint: it’s people that the brokers might want to curry favor with, and those people tend to include elected officials. If you are not sure how rampant this is, keep this in mind: the average Congressperson beats the market by 6% per year, and the average Senator by 10%. Your Senator is as good an investor as Warren Buffett… There is actually more to this, including the discussion of general fraud provisions (RIA’s can’t lie, steal or cheat) that is applicable on a very large scale to the actions of elected officials. I think, however, that you probably get the point: our elected officials demand that others live up to significantly higher standards than those to which they hold themselves.
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CDP
“....I gladly err, nor do I wish this error which gives me
Pleasure to be wrested from me while I live.”- Marcus Tullius Cicero As someone somewhere at some point probably said, you can go broke real quick betting the under on the gullibility of the American people. After all, the American people are the people who elected the people who voted for Prohibition, only to quickly realize that we needed a stiff drink. Americans fell for a Federal holiday celebrating labor. We bought pumpkin spice in products other than pies, where it belongs. We still have the designated hitter! But nothing has ever demonstrated the gullibility of Americans like election 2016. In one corner are people gullible because they actually think their candidate is what the media portrays her to be: the smartest, most qualified human to ever run for any elected office in any country on any planet in any galaxy. Not only does she care about the people, but she is actually exactly like them. She sends her staffers and confidants emails about yoga and weddings and never about attacks on one of our diplomatic compounds or other classified stuff. She has the ability to fix our healthcare system, even though she had the crap idea that currently has us behind the eight ball herself 25 years ago. They’re also gullible about her political opponents. It’s easy to fall for the idea that the only possible reason to oppose her is that she’s female when being female is really the only thing she’s got going for her, but most of us actually oppose her on policy grounds. Her being a woman has exactly zero to do with it, although opposing the odiousness of her character is a nice bonus to the policy reasons. In fairness to her supporters, she has spent decades using the “they hate me because I’m a woman” angle, so maybe they’re not so much gullible as suffering from some sort of Big Lie syndrome. The other side’s true believers are at least as bad. They actually think that even though voting procedures are set at the state level where their party controls the majority of the relevant offices that somehow the other side is capable of an intricate voter fraud scheme. Why do they buy into this absurd notion? Because their guy and his surrogates told them it was so, despite the easily checkable and obvious fact that barring the collusion of literally thousands of people on their side, it’s impossible. The slightly less gullible among them will tell you that what is meant by “rigged” is the media coverage and not actual election fraud, but that’s just them whistling past the graveyard where their incredulity is buried. The Never Eithers aren’t immune to gullibility. You have to be fairly exploitable to buy into the idea that the best way to fix your party or political movement is to expunge anyone and everyone who had the insolence to do something like vote for their party’s nominee, no matter how unacceptable they personally find that nominee. It’s not as if that would completely destroy any chance of rebuilding a viable opposition force to your political enemies. Come to think of it, it actually sounds like something your political enemies might be actively encourag...nah, that’s tinfoil hat territory, surely. Where do I fall on the gullibility scale, you ask? The truth is I’m probably more guilty of being fooled than anyone. I thought that for most Americans politics was still somehow a thing apart in our national life: that, while we may differ on how we wish to be governed, there was agreement that we were all interested, at least at the national level, in fundamentally serious and genuine leaders. By this, I mean that we lived with the knowledge that there’s always a chance we could vote for someone who turns out to be a criminal or all around dirtbag, but that most of us wouldn’t vote for someone who we already knew to be a criminal or all around dirtbag. I truly still thought that two Americans could hold diametrically opposing views on the role of government and recognize that they both honestly and earnestly believe their way was best for the country as a whole: that politics, for most of us, wasn’t just about having more of our guys on the roster than the other team. I still actually believed that there were more than one or two politicians who would do what was right because it was right, regardless of the political ramifications. I still thought that being “American” was more important to most people than being “Democrat” or “Republican.” I honestly was still under the impression that the majority of Americans loved their country more than they loved their government. How’s that for gullible?
The Misfits
In honor of National Book Month of 2016, the Misfits have contributed to this roundup piece with their most cherished books of all time. Because we are all enthusiastic readers and book lovers, this was a challenging, difficult task. Many beloved books had to be left behind to make room for just a choice few. Some of us picked just one special favorite, while others pushed the boundaries and came up with several. Without further ado, and in no particular order, here are the Misfit’s most treasured books of all time: J.R. (@JHolmsted) For my head: "The Federalist Papers" by Hamilton, Madison, and Jay. I could read these a million times over. Simply brilliant. Need I really say more about some of the most influential writings affecting the creation of our government and nation? "The Iliad" by Homer. One of the ultimate classics. I know, I know, typically people enjoy the exciting adventures of Odysseus more, but I've always been partial to this woven tale during the Trojan War. It warns of the dangers of stubborn pride, highlights bravery and honor, and underlines the heavy sacrifice and personal costs of war. Plus it has some famous characters who are just plain fun to follow through the betrayals, battles, and divine interventions. For my heart: "Pride and Prejudice" by Jane Austen. Sure, it's probably the original RomCom. So what? Love, heartbreak, scandal, betrayal, quirky characters, veritable wit...it has it all. Complete with two independent and stubborn BUT(!) destined lovers. I've read it a dozen times and love it more with each read. For my soul: "Margot Fonteyn: A Life" by Meredith Daneman. I basically danced out of the womb. I trained as a classical ballerina in an intensive pre-professional program, then danced professionally into my late twenties. Margot Fonteyn was an icon. She was the ballerina of the 20th century. The most famous, danced the most performances, originated the most roles, and worked with all the greats. She also held the longest career, not retiring until the age of 61. This biography of her inconceivable life onstage and off is raw and inspirational. Honorable Mentions: "The Poisonwood Bible" by Barbara Kingsolver, "Uncle Tom's Cabin" by Harriet Beecher Stowe, "1776" and "John Adams" by David McCullough. CDP (@cdpayne79) “Steinbeck: Novels 1942-1952” Yes this is an anthology so it's cheating but it contains both The Moon is Down and East of Eden, so shut up. Both are, in their own way, about the inexorable striving of the human spirit for personal autonomy, be it from other men or from Fate (God). The philosophical discussions between Lee and Samuel Hamilton alone are enough to get me to reread East of Eden every couple of years. Oh, and fuck you, Oprah, for trying to ruin one of my favorite books. “A Prayer for Owen Meany,” by John Irving. Also about Fate, so there may be a theme here. But it's also about courage in the face of your fate, and whether or not anyone, even God, has the right to use another human being for His own purposes. Irving is also very funny, which I enjoy. “The Gates of Fire,” by Steven Pressfield. Historical novel about Thermopylae. This is a guy's book, but I love it. “Waiting for April,” by Scott Morris. The best novel nobody's heard of. I'd call it a 21st century 'Look Homeward, Angel'. Very Southern. Alex (@VerumVulnero1) “A Tale of Two Cities,” by Charles Dickens. Because it’s riveting, the last third is brilliant and the final scene is the best thing ever written in English. “Guns, Germs and Steel” by Jared Diamond because it's a fascinating take on really boring material. “All the Light We Cannot See,” by Anthony Doerr because of its affirmation of human spirit. “Mike Mulligan and His Steam Shovel,” by Virginia Lee Burton for its unintentionally dark summation of humanity's failings. The old man works his entire life just to dig himself a hole so deep he can't get out of it! Avi Woolf (@AviWoolf) “Strange Case of Dr. Jekyll and Mr. Hyde,” by Robert Louis Stevenson A short, but incredibly powerful tale about good and evil. You will find yourself thinking and worrying about human nature itself…especially after you read the last chapter. Anything by GK Chesterton Chesterton has written so much and so well that to recommend any specific work of his is to do him a disservice. I know of no-one who wrote so often and so well in favor of wonder, fantasy, human compassion, truth, and on how "boring, ordinary life" really is an amazing adventure, if only we open our eyes and see it. “A People's Tragedy” by Orlando Figes A tragic, gut-wrenching, horrifying account of the Russian Revolution, and of how a whole empire brutally tore itself apart through mutual social hatreds. No-one sane can read this and think "burn it down" is anything but a nightmare to be avoided. Anything by Dr. Seuss Yes, I'm serious. No-one captured the wonder of childhood for me more than the author of The Cat in the Hat, Wacky Wednesday, Green Eggs and Ham, and so many other books. His works let us know that even as we mature as adults, there's no shame in holding onto a bit of silliness and craziness. Especially if it shows up on Mulberry Street. Dan (@danieltobin) “Brave New World,” by Aldous Huxley, for its complex, prophetic warning of a controlled, dystopian state, fueled by a disintegration of morality and the discouragement of individualism and critical thinking, and the ensuing chaos when that system is disrupted. I read it when I was 16, and it's had a great impact on my life. "Slaughterhouse-Five," by Kurt Vonnegut, for its search for humanity after the destructiveness of war, and the confused contemplation of existence through science fiction. “East of Eden,” by Steinbeck, for its masterful storytelling, and portraying the continual battle of good and evil. Honorable mentions: “Cat's Cradle,” by Vonnegut, “Catch-22,” by Joseph Heller, “Moby Dick,” by Herman Melville. Rebecca (@blazermc88) “Hell House” – by Richard Matheson I’ve been a die-hard horror fan (books and film) for almost my whole life. It started when I was a tot – my parents were watching “The Trilogy of Terror” on TV, and I sat silently on our staircase where they couldn’t see me peeking around the corner. I was terrified and mesmerized all at once, and my love of horror was born. I read my first horror novel, “It,” by Stephen King as a young teenager, and it shook me to my core. Since that time I have devoured as many horror-themed books and films as possible. Only one stands out to me above all others, however, and that is the novel “Hell House.” It was originally published in 1971, but I didn’t discover it until the mid-nineties. I finished it in under two days because I just couldn’t put it down. Terrifying, gruesome, depraved, wicked, nasty, offensive, creepy – this is not for the faint of heart – which is why it won MY heart. “Rebecca” – by Daphne Du Maurier My Twitter handle gives this away, of course. I fell in love with “Rebecca” when it was assigned to read in my English class my 10th-grade year of high school. From the very first line, “Last night I dreamt I went to Manderley again,” I was lured into the mysterious world of this modern gothic, transfixed by its deceptive simplicity. Underneath the casual conversations and formal interactions between the never-named narrator, Mrs. de Winter, her husband Maxim, the ghastly Mrs. Danvers and others, lies a chilling intrigue. The star of the show here, the deceased first wife of Maxim – Rebecca – dominates their entire existence, and I found myself as jealous of her as the new Mrs. de Winter was. Manderley itself (the estate where most of the plot takes place) serves as an imposing character in itself, and I loved it, dark and mysterious as it was. I’ve read this countless times, and I never fail to find something new to appreciate within its depths. “Brave New World” – by Aldous Huxley Generally placed in the “dystopian” genre of fiction, “Brave New World” kicked me in the gut as effectively as any well-written horror novel. Whatever you want to call it, it chilled me to my bones and left a lasting impression upon me. I read it at about age 15, and I remember seeking out my dad (a bibliophile if there ever was one) to hash out the hundred or so questions and fears it brought me. What is a human soul, and what happens to it in a world such as this? “The Years of Lyndon Johnson” series – by Robert A. Caro A four-part biography of the life of Lyndon Baines Johnson, this series meticulously traces the life of LBJ going all the way back to the years in the hardscrabble Texas Hill Country before he was even born. Caro takes the readers from that time, through his childhood, teen and young adult years, his path into Congress, all the way to the presidency. I alternated between complete and utter loathing for this nasty, cruel man (Caro doesn’t candy coat, to put it mildly) to admiration for his almost supernatural will to achieve power with significant accomplishments on the way. Setting aside the life of LBJ himself, this series gives the reader an unflinching, hard look into the machinations of power, deceit, and hubris of the political players in DC itself. I’d recommend it just based on that. Honorable mentions: “Lolita,” by Vladimir Nabokov, “Gone With the Wind,” by Margaret Mitchell, “The Secret Garden,” by Frances Hodgson Burnett. Rex (@LunaticRex) "Notes from a Small Island" by Bill Bryson. It chronicles Bill's first visit to Great Britain, I think in the early 80s. I laughed all the way through. Originally read my wife’s copy on our first (of many) trips to Venice. Great, fun read. ("Watching the English" by Kate Fox gets honorable mention. Another great read) "The Stand" by Stephen King. I've read it at least twice because I bought it when it came out, then I bought the expanded edition and read that. I think it's the least schlocky, most serious fiction he's ever written. Spooky, weird, great characters. It's dystopia at it's best. ("Pet Semetary" gets honorable mention here, though the movie sucked) Another favorite is the recent non-fiction "Heavy Lifting: Grow Up, Get a Job, Raise a Family, and Other Manly Advice" by Cam Edwards and Jim Geraghty. Just a wonderful, easy read that every young man (especially college kids who know nothing) should take to heart. Each writer tells a story about themselves and translates that to helpful advice for the young 'men' of the modern world. Ward Cleaver is a Stud and WWWCD prevalent throughout. :) I'm a big fan of the “Politically Incorrect Guide” (PIG) series. The Civil War, The British Empire, Islam (and the Crusades) come immediately to mind, but there are many, and they rock. Mo (@molratty) My favorite book is “East of Eden,” by Steinbeck. My Grandma, who's one of my heroes, loaned me her copy when I was 14 and encouraged me to read it, so it always reminds me of her. The story is gripping and interesting. But I love it most because it taught me that free will is paramount. No matter what circumstances you're born into or evil that happens to you, you have the ability to overcome it by what you choose to do. My favorite part of the book is when Lee is discussing the story of Cain and Abel in the Bible. He describes to Adam and Sam the results of his research into the meaning of the Hebrew word "Timshel," which is what God says to Cain when banishing him for killing Abel. After consulting various biblical scholars, Lee determines that the word does not mean "Thou shalt" or "Thou will" but instead that "Thou mayest" overcome evil, suggesting that the power to overcome evil is a choice. One of my favorite quotes from the book: "I believe that there is one story in the world, and only one. . . . Humans are caught—in their lives, in their thoughts, in their hungers and ambitions, in their avarice and cruelty, and in their kindness and generosity too—in a net of good and evil. . . . There is no other story. A man, after he has brushed off the dust and chips of his life, will have left only the hard, clean questions: Was it good or was it evil? Have I done well—or ill?" This made a huge impression on me in part because my Grandma had many sad and bad things happen in her life growing up. She could have been bitter at the unfairness, but she wasn't. She was strong, warm, kind, moral, and tough as nails. Ray (@miscRaymer) “It,” by Stephen King. The plot is both heartbreaking and thrilling but it’s the characters and King’s mastery of foreshadowing to build suspense and dread of things to come that make it my favorite. He'll tell you before you get to know a character that they're going to die, then he'll make you like them, or hate them, but care either way, only to then remind you that Yes this character is going to die, and horribly, but not yet. Then he'll take his time so as to give you hope that maybe you misunderstood. Then he kills them. It’s heartbreaking and beautiful. Just a masterful piece of modern Americana. Also, though it’s a short story: “The Color from Outer Space,” by HP Lovecraft, such a beautifully heartbreaking tale of terror in the middle of Massachusetts. Lovecraft had none of the heart that King wields, nor the technical skill, but his VISION is clear. You believe he is speaking from experience when you read about the terror the farmer felt as the Orange/Purple corruption overtook his farm, his family and his sanity. Daryl (@2009superglide) “It Doesn’t Take a Hero,” by General H. Norman Schwarzkopf. It is a must-read before the election, it shows how empathy is a huge part of leadership. If anyone had to read just one book before the election, it should be that book. Kayla (@VixenRogue) “Celia Garth,” by Gwen Bristow - I love the setting, Revolutionary War Charleston. The characters weave in and out with real historical figures, bringing them to life. It's romantic and exciting and at times gut wrenching. By the end, you're cheering equally for Celia and the United States. Hired Mind (@thehiredmind) “Revelation Space,” by Alastair Reynolds. Marc Logic (@marcannem96) “A Good Walk Spoiled: Days and Nights on the PGA Tour,” by John Feinstein As a former golf professional, I was absorbed by Feinstein’s peak into the real world of the PGA Tour – not the upper crust, rich and famous guys getting the autographs, but the ups and downs, heartaches and achievements of the average professional golfer, including the ones living out of their cars just to make a living trying to make the PGA Tour. Rascal (@GentlemanRascal) “Ender's Game,” by Orson Scott Card - One of the best written military scifi novels ever written. It may sound a bit far fetched at times, with children military tacticians, however that can be set aside. The novel has always resonated with me, from the character of Ender to what he went through and the thoughts and concerns he faced. Highly recommended, I try to read it at least once every year or two. “The Name of the Wind,” by Patrick Rothfuss - The telling of a hero's true story. His origins from a child up through his formative adolescent years. It covers the lies, the truths, the embellishments. It is the first part of a trilogy (book 3 still pending publishing as of this writing), and takes the hero's journey and Harry Potter and adds some more flair to it. “The Count of Monte Cristo,” by Alexandre Dumas - Read this one unabridged. It is one of the most beautifully crafted novels I have ever read. Originally serialized and covering many different plot threads that all tie together at the end, the story of Edmond Dantes search for revenge and the story arc he goes through is one of the most profound stories I have read in a very long time. “Animal Farm,” by George Orwell - Animals discover communism is bad news. What more needs to be said? “Tigana,” by Guy Gavriel Kay - A fantasy novel about a country that has been ripped from the memory of every living person-- except for the residents of the country itself. A deeply moving, tragic tale involved the search for love, for vengeance, and the meaning of identity. Let this novel introduce you to the many beautifully written novels by GGK. Honorable mentions: “Atlas Shrugged,” by Ayn Rand, “Watership Down,” by Richard Adams, “The Lies of Locke Lamora,” by Scott Lynch, the “Mistborn” series by Brandon Sanderson. |
MisfitsJust a gaggle of people from all over who have similar interests and loud opinions mixed with a dose of humor. We met on Twitter. Archives
January 2024
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