Wednesday, March 7, 2012

133 Stocks surging as Jobs disappear. Volcanoes in Arctic Rift Valley "do not melt Ice"

Stocks surging as Jobs disappear. Volcanoes in Arctic Rift Valley "do not melt Ice"

(1) China the biggest beneficiary of the Recession; but Overcapacity lurks
(2) Foreclosures: Worst Three Months Of All Time
(3) Why Stocks Are Surging As Jobs Disappear
(4) GFC 'bullet' on its way to Australia, warns Access Economics
(5) Paper Gold: there are several owners for each ounce of physical gold
(6) Arctic Volcanoes Found Active at Unprecedented Depths
(7) Volcanoes in Arctic Rift Valley "do not make Arctic Sea Ice melt"

(1) China the biggest beneficiary of the Recession; but Overcapacity lurks
From: Tony Ryan <tonyryan43@gmail.com> Date: 19.10.2009 04:13 AM

Michael Pettis provides previously unrevealed details about China's commodities imports, in juxtaposition to exports and industrial relations.

The picture he paints supports my speculations (Portrait of Globalisation) about the real future of China's exports, and how the inevitable decline will reverberate in Australia.

Although China is marginally expanding its exports, successfully at Japan's and Latin America's expense,  it is doing so by squeezing not just migrant labour, but Chinese workers as well. Moreover, it appears that quality control has been sacrificed along with capacity to service loans. Europeans have responded calmly by saying that at the end of the day, product quality will mandate buyers; this being the main characteristic of surviving future markets. They are probably right.

However, there appears to be little in the media about how Chinese workers are handling their sacrificial role in the economy. As readers would have noted, one plant manager did a three story swallow dive, launched on his pilgrimage to the ancestors by desperate workers. This suggest that other incidents must have occurred but these have been frozen from the Chinese media. It seems certain that worker incomes will continue to subsidise the export industry, and that Chinese worker patience will become exhausted. This will herald a new national industrial overhead... khaki incentives. This will be the beginning of the end of the nationalist dream for global dominance. There are simply too many problems emerging at other levels of government... dwindling river flows, rampant pollution, ethnic dissatisfaction, emerging border wars, increasing dust storms, urban migration, and so on. As in all wars, logistics is the real killer.

Withe the US consumer about to be hit by new bubble bursts (matured deferred interest, commercial realty, retail and government revenue implosions) China will have little option but to start selling off excessive stockpiles, which will force global commodities prices down and terminate Australia's exports. The double whammy is that other mineral-exporting nations will also be forced to delimit imports from China, enhancing China's desperation.

Australia would be wise to anticipate this and quickly redevelop our domestic industries. To achieve this we must restore tariffs, enabling farmers to produce food that we will no longer be able to purchase from China; and providing an economic climate in which Aussies can return to manufacturing. A happy concomitant of this will be the re-creation of the three million full time jobs that were lost due to tariff removal and commitment to free trade.

This is not good news for politicians who want to introduce ETAs, which must now be abandoned; but the good news is that the slight increase in CO2 that might ensue will aid flora on the planet to grow faster and thus replenish the atmospheric and oceanic oxygen that is currently dwindling at an alarming rate. Oh yes, I forgot to mention; this is the new international crisis... Anthropogenic Oxygen Depletion (AOD) due to corporate removal of forests. Hmmm. Perhaps we should get it right this time and recognise that mankind did not do this; corporations and the IMF did. So, delete 'anthropogenic' and replace it with 'Corporate'.

(2) Foreclosures: Worst Three Months Of All Time

From: IHR News <news@ihr.org>  Date: 17.10.2009 05:56 PM

CNN
http://money.cnn.com/2009/10/15/real_estate/foreclosure_crisis_deepens/

NEW YORK (CNNMoney.com) -- Despite concerted government-led and lender-supported efforts to prevent foreclosures, the number of filings hit a record high in the third quarter, according to a report issued Thursday.

"They were the worst three months of all time," said Rick Sharga, spokesman for RealtyTrac, an online marketer of foreclosed homes.

During that time, 937,840 homes received a foreclosure letter -- whether a default notice, auction notice or bank repossession, the RealtyTrac report said. That means one in every 136 U.S. homes were in foreclosure, which is a 5% increase from the second quarter and a 23% jump over the third quarter of 2008.

Nevada continued to be the worst-hit state with one filing for every 23 households. But even tranquil Vermont, where the foreclosure crisis has barely brushed the housing market, saw foreclosure filings jump nearly 170% compared with the third quarter of 2008. Still, that resulted in just one filing for every 5,023 households in the state -- the best record in the country.

The RealtyTrac report also unveiled the results for September, and it found that there was slight relief from foreclosure filings. Last month, notices totaled 343,638, down 4% compared with August. Unfortunately, that total accounts for 87,821 homes that were repossessed by lenders.

That deluge contributed significantly to the quarter's record 237,052 repossessions, a 21% jump from the previous three months. So far this year lenders have taken back 623,852 homes.

"REO activity increased from the previous quarter in all but two states and the District of Columbia, indicating that lenders may be starting to work through some of the pent-up foreclosure inventory caused by legislative delays, loan-modification efforts and high volumes of distressed properties," James Saccacio, RealtyTrac's CEO, said in a statement.

Most disturbing is that all foreclosures -- not just repossessions -- are rampant despite efforts to corral them. Not only has the Obama administration's Making Home Affordable foreclosure prevention program taken a bite out of REOs but lenders themselves have scaled back repossessions over the past few months to give the program time to work.

And in some low-price markets, lenders simply aren't following through on foreclosures, according to Jim Rokakis, treasurer for Cuyahoga County, Ohio, which includes Cleveland.

"They'll even set the date for the sheriff's sale, but they don't file the final papers," he said. "They hold it in abeyance and let the residents stay in the house."

In ever more frequent cases, delinquent borrowers want out of the mortgage worse than the lenders. There are no firm statistics for it, but many industry watchers claim the percentage of REOs caused by borrowers voluntarily walking away from their homes is skyrocketing.

A study of the trend by the Chicago Booth School of Business and the Kellogg School of Management determined that when home price declines drop home values 10% below the mortgage balances, people start to give up their homes. When "negative equity" approaches 50%, 17% of households default, even when they can still afford their mortgage payments.
No end in sight

The foreclosure crisis may not diminish anytime soon. "The fastest growing area is in the 180 days late-plus category, the most seriously delinquent borrowers," Sharga said. "It's going to be a lingering problem."

Plus, the RealtyTrac statistics may understate the depth of the foreclosure mess because lender and government actions have delayed many filings. As a result, some delinquencies have not been counted on the foreclosure tallies. That means the crisis may not end quickly.

And because there are so many delinquent borrowers, Sharga predicts the banks will be slow to take back their properties and put the repossessed homes back on the market.

"It's hard to envision [the banks] putting millions on properties up for sale and cratering prices," he said. "Recovery will be slow and gradual. I don't see home prices getting much better until 2013."
First Published: October 15, 2009: 3:39 AM ET

(3) Why Stocks Are Surging As Jobs Disappear

From: IHR News <news@ihr.org>  Date: 17.10.2009 05:56 PM

US News & World Report
http://news.yahoo.com/s/usnews/20091015/ts_usnews/whystocksaresurgingasjobsdisappear

By Rick Newman Rick Newman – Thu Oct 15, 11:40 am ET

Stocks are up. Jobs are down. So if you're an investor you're enjoying a vibrant recovery and if you're a worker it still feels like a grinding recession.

Since bottoming out in March, the stock market has soared by about 60 percent, one of the most awesome rallies in market history. The Dow Jones Industrial Average cracking 10,000 may not be strategically significant, but it's a psychological breakthrough that's worth cheering after the demoralizing crash that preceded it.

[See 5 myths about the economic "recovery."]

While the Dow has been racing upward, however, the unemployment rate has also skyrocketed, from 8.5 percent in March to 9.8 percent now. The economy has lost 7.2 million jobs since the recession began at the end of 2007, and the trend is still going the wrong way. The unemployment rate will almost certainly hit 10 percent and hover near there for awhile in 2010, before gradually declining.

So are job losses good for the stock market? Actually, yes. At least for awhile. Stocks are rising because many companies are earning more money than analysts have expected. But earnings aren't up because companies are selling more stuff; most companies are still selling less stuff and grappling with falling revenue. Instead, earnings are rising because companies have cut their costs more than revenues have fallen. And "costs" are often the same as "jobs." Consider these snippets from some recent earnings reports:

Johnson & Johnson. Third-quarter revenue was down 5.3 percent but net earnings rose 1.1 percent.

[See 4 problems that could sink America.]

Domino's Pizza. Third-quarter revenue down 6 percent; net earnings up 77 percent.

Abbott Labs. Third-quarter revenue up 3.5 percent; net earnings up 36.5 percent.

Pepsi. Third-quarter revenue down 1.5 percent; net earnings up 9.5 percent.

Alcoa. Third-quarter revenue up 9 percent, compared with the second quarter; net earnings swung from a $459 million loss to a $124 million profit.

[See 8 industries that will sit out a recovery.]

All of those companies have laid off workers over the last two years, probably necessary to keep the company healthy. And it's worth keeping in mind that when earnings outperform revenue, it's a sign that the company is well-run (assuming there's no Enron-style hocus-pocus). But CEOs also know that you can't grow a company or keep juicing the stock price by cutting costs and slashing jobs. Real growth only comes from new customers, new business, and increased revenue. And on that measure, the outlook is murky for the stock and job markets both.

The same workers who have been getting laid off, improving the cost profile for many companies, are also consumers running out of money to spend. Some are going bankrupt, defaulting on bank loans, and losing their homes. That's a major risk to corporate profits--and stock prices--down the road.

[See 10 retailers gaining strength from the recession.]

Some companies will be able to coast for awhile. The weak dollar and relatively strong economies in Asia and parts of Europe and South America, for example, are good news for U.S. exporters, since it helps them offset weak U.S. sales with stronger business overseas. And more-efficient companies can withstand lean times longer. But most American companies still rely on American consumers to keep business humming. Sooner or later, the U.S. job and stock markets need to go in the same direction.

The question is whether the job market will hitch onto the coattails of the stock market, with companies starting to hire as their fortunes improve--or stocks will turn south as the ranks of the unemployed swell. Good thing workers and investors both have become familiar with uncertainty.

(4) GFC 'bullet' on its way to Australia, warns Access Economics

http://money.ninemsn.com.au/article.aspx?id=877367

Access Economics

19/10/2009 8:30:00 AM

By Emma Thelwell, ninemsn Money

Australia has not dodged the 'bullet' of the global financial crisis, experts have warned, with the economy facing a slow recovery.

Cash-strapped families with shrinking incomes will be unable to provide the boost the economy needs, Access Economics said today.

Australians are currently only saving 4 percent of their incomes, but even this has been artificially supported by Kevin Rudd's cash splash and the Reserve Bank's interest rate cuts.

The two measures temporarily boosted the average family income by 10 percent, Access said in its quarterly economic outlook.

The "sea of stimulus" helped push household interest payments down from 14.4 percent of incomes to 9.1 percent - and encouraged shoppers to spend 7 percent more than when the crisis hit, according to Access estimates.

"Canberra decided to 'go early, go hard, go households'", Access said.

However, almost all of the cash splash has already dried up, and official interest rates are already on the rise.

Up 0.25 percent this month, to 3.25 percent, rates are expected to climb a further 2 percent over the next 18-24 months. The rise will see the RBA claw back more than half of the recent boost it gave to disposable incomes.

The stimulus measures may have saved Australia from a deeper downturn, Access concedes, but it comes "at the cost of a softer and slower recovery than today's headlines suggest".

"There just isn't enough fuel in the family savings in the tank to get retailers through the period of policy withdrawal without damage", Access said. The retail sector will face a tough 18 months, Access warned, as families grapple with shrinking incomes.

"The bullet is still coming", Access said. "And either retail stays slow or families rapidly revert to spending more than they earn – which merely delays an eventual rough retail period to a later date."

Unemployment rates may have pulled back from 5.8 percent to 5.7 percent, but the number of hours worked by employees is falling, Access warned, which is cutting into underlying incomes.

However, the nation has lost just 30,000 jobs – one in every 400 – while the US has lost 16 for every one lost here in Australia.

Meanwhile, Australia's relationship with China and commodity prices, affect the Federal Budget "much more than unemployment does", Access said.

The main risks to Australia from a 'global double dip' recession, lie with China, the report warned.

China has staged a remarkable recovery, but the better that China does in 2010, the greater the risk that it weakens in 2011, bringing down commodity prices with it and hitting Australia's economy.

China's rapid recovery is expected to propel Australia's Budget balance forward by around $10 billion – creating short term momentum, Access said, which leaves the economy vulnerable to future falls in commodity prices.

Access pointed to the "best one-liner ever penned" on Australia's economy, in The Economist magazine in the mid-1980s - as a reminder to the Rudd government to act courageously, now, to protect Australia's longer term future. "Australia is one of the best managers of adversity the world has seen – and the worst manager of prosperity", The Economist stated.

Australia's longer term budget position is tipped to have weakened substantially since 2007, the imminent release of the Treasury's Intergenerational Report (IGR) is expected to show.

"We hope that the early release of the IGR signals that the Government will finally get tough on the Budget, and will be doing so ahead of the next Federal election rather than after it", Access said - calling on the government to review taxes and spending now in order to protect long-term prosperity and encourage a smoother road to economic recovery.

(5) Paper Gold: there are several owners for each ounce of physical gold
From: Paul de Burgh-Day <pdeburgh@harboursat.com.au>  Date: 18.10.2009 08:19 AM

Adrian Douglas: How much imaginary gold has been sold?

Submitted by cpowell on 09:45PM ET Friday, October 16, 2009. Section: Daily Dispatches
By Adrian Douglas
Friday, October 16, 2009

On October 10 I published an article that postulated that the gold market is a Ponzi scheme because it sells gold that doesn't exist by implementation of the principles of fractional reserve banking. (See http://www.gata.org/node/7887.) Since writing that article further information has come to light that supports this claim and allows an estimate of how much gold has been sold that doesn't exist if the owners of the gold ask for it.

In other words, there are several owners for each ounce of physical gold.
By complete coincidence Paul Mylchreest of The Thunder Road Report has just written an in-depth study into the daily trading volumes of gold on the London over-the-counter market, which can be found here:

http://www.gata.org/files/ThunderRoadReport-10-15-2009.pdf

The London OTC market is where most physical gold is traded. This market is a wholesale market where trades are conducted only between the bullion trading houses on behalf of their clients. About 95 percent of the trading is by way of gold that is held in unallocated bullion accounts.

The unique characteristic of gold is that about 50 percent (80,000 tonnes) of the above-ground stocks are held as a store of wealth (investment). The other 50 percent exists as jewelry. When gold is bought as a store of wealth it can perform that function for you wherever it is in the world. Given this unique characteristic many large investors in bullion prefer to leave their gold with the bullion dealer from whom they bought it so that it can be stored in their vault and easily resold. This is identical to the situation with stocks, where most stock certificates are held by brokerage houses, not by individuals.

That people are buying and selling gold without ever taking delivery means that there is the opportunity for bullion houses to sell gold that doesn't exist.

Now the bullion houses probably don't view this as illegal or dishonest because they will operate a fractional reserve type of system, just as the banks do with fiat currency, and will make sure they have enough gold on hand for what would be the maximum estimated volume of gold that could be called for delivery. After all, trading is done with unallocated gold, so how much more unallocated can it get if it doesn't exist at all?

This is what caused bank runs in the days of the gold standard. People would deposit gold in a bank and receive bank notes (dollar bills) in exchange. At any time the depositor could return and hand over his bank notes and receive from the bank the same quantity of gold he deposited. The banks realized that under normal circumstances a maximum of about 10 percent of the gold deposited could be requested. So the banks saw an opportunity. They could issue up to 10 times as many bank notes in loans as there was gold in the bank and they could earn interest on the bank notes. The system worked until there was difficulty meeting withdrawals. Then word spread quickly that the bank was insolvent, and as holders of the banknotes rushed to the bank to redeem them for gold, the bank would admit it had insufficient gold and would declare bankruptcy.

The origin of the word "bankruptcy" is from the Latin words "bancus" and "ruptus," which means literally that the bank is broken. Banks have gone bust frequently enough to have earned themselves the ownership of the word to describe the phenomenon. Isn't that ironic when banks are meant to be a safe store for money?

This basic scam is at the center of modern gold market manipulation. Instead of real gold, paper substitutes for gold are sold through derivatives, futures, pooled accounts, exchange-traded funds, gold certificates, etc. I estimate that each actual physical ounce of gold has multiple ownership claims to it.

For the scam to be sustained there must always be plentiful physical gold for those who want it. The market is, in effect, a giant inverted pyramid with a huge paper gold market being supported by a small amount of physical gold at the tip of the inverted pyramid. The scam can continue until there are indications of a shortage of physical gold. If all the claimants of each ounce of real gold demand their gold, then there is the potential for a squeeze such as has never been seen before.

To lend support to the idea that all the gold in the world has been sold several times over I cite the case of Morgan Stanley, which was sued in 2005 for selling non-existent precious metals. Morgan Stanley even had the audacity to charge storage fees. The firm settled the class-action lawsuit out of court but no criminal charges were ever filed. If Morgan Stanley was doing this, you can bet that it is the tip of the iceberg.

Paul Mylchreest has done fabulously detailed research into data on the daily trading of gold on the London OTC market. He concludes that 2,134 tonnes of gold are traded each and every day. That is a shocking number because this is 346 times larger than all the gold that is mined in the world each day. ...

The daily gold trading in London is simply humongous. We talk of the gold market being a tiny market. It is anything but. It has a daily turnover of $70 billion. To put this in perspective, the world consumes 86 million barrels of oil each day. The total cost of the global daily oil consumption is a mere $6 billion! ...

(6) Arctic Volcanoes Found Active at Unprecedented Depths

Kimberly Johnson

for National Geographic News

June 26, 2008

http://news.nationalgeographic.com/news/2008/06/080626-arctic-volcano.html

Buried under thick ice and frigid water, volcanic explosions are shaking the Arctic Ocean floor at depths previously thought impossible, according to a new study.

Using robot-operated submarines, researchers have found deposits of glassy rock—evidence of eruptions—scattered over more than 5 square miles (15 square kilometers) of the seabed.

Explosive volcanic eruptions were not thought to be possible at depths below the critical pressure for steam formation, or 2 miles (3,000 meters). The deposits, however, were found at seafloor depths greater than 2.5 miles (4 kilometers).

"This kind of implosive seismicity is rare anywhere on Earth," said study author Robert Sohn, a geophysicist at the Massachusetts-based Woods Hole Oceanographic Institution.

The study appears today in the Journal Nature.

Anatomy of a Mid-Ocean Ridge

Seismic activity was previously detected in the same region in 1999, along the Gakkel Ridge—a 1,200-mile-long (2,000-kilometer-long) mid-ocean mountain range north of Greenland.

Hundreds of earthquakes were observed over a nine-month period, with magnitudes between 4 and 6.

This earthquake swarm was the largest in recorded history along a spreading mid-ocean ridge and prompted researchers to return to the area for further investigation.

In 2007 Sohn and his team stumbled across the glassy pyroclastic rock deposits while searching for hydrothermal vent fields in the Gakkel Ridge.

Powerful eruptions sent a plume of carbon dioxide, helium, and liquid lava up into the Arctic waters. When the material cooled, rock debris fell to the ocean floor, he explained.

Mid-ocean ridges are formed as hot molten material from inside Earth seeps into and fills the opening between two spreading tectonic plates. The Gakkel Ridge is considered an ultraslow spreading ridge because its plates spread at a rate of 0.4 inch (1 centimeter) a year.

(7) Volcanoes in Arctic Rift Valley "do not make Arctic Sea Ice melt"

What’s Up With Volcanoes Under Arctic Sea Ice

By Andrew C. Revkin

July 1, 2008 , 4:50 pm

http://dotearth.blogs.nytimes.com/2008/07/01/whats-up-with-volcanoes-under-arctic-sea-ice/

The heat from sea-bed volcanoes in the Arctic Ocean is kept isolated from the surface by layers of intervening water, experts say. A cross-section of the Gakkel Ridge as compiled by Henry Dick, co-chief scientist on the Arctic Mid-Ocean Ridge Expedition. (Credit: Paul Oberlander / Woods Hole Oceanographic Institution)

There was an eruption of assertions in recent days that the increasing summer retreats and thinning of Arctic Ocean sea ice might be a result not of atmospheric warming but instead all the heat from the recent discovered volcanoes peppering the Gakkel Ridge, one of the seams in the deep seabed at the top of the world.

Several experts said it was not plausible from the get-go, but for the sake of due diligence, I queried a heap of the Arctic oceanographers and climate and ice experts I’ve gotten to know since my North Pole journey in 2003. They uniformly reject the idea that heat from the bottom — either from the general geothermal activity beneath the seabed or the occasional outbursts of lava or vents — could have a significant impact on the veneer of floating, drifting ice on the surface.

The deep saltier, warmer water is largely isolated from the cold, fresher waters near the surface, they say. I’ve listed some responses below, with more to come. I’m in transit and can’t transliterate some of the techno-speak at the moment, but wanted to get this post up while the issue is still burbling in the blogosphere.

Here are the views of these scientists:

Peter Winsor, Woods Hole Oceanographic Institution:

    I have had similar questions from the general public recently. On our recent Arctic expedition named AGAVE to the Gakkel Ridge (~85N) in 2007 we found evidence of recent explosive volcanic eruptions. However, most of the heat flow at the Gakkel Ridge seems to be diffusive and slowly seeping out. In any case, heat releases from the Arctic sea floor do not get higher up in the water column than, typically, ~500-1000 m from the ocean floor due to constantly mixing with ambient water on its way up (so-called entrainment). There is also a background heat source due to the constant cooling of the Earth’s interior. This slow-simmering geothermal heat flow is actually able to mix the very weakly stratified bottom waters of the Arctic. So, heat is released from volcanic activity, both from explosive larger events and more broad diffusive events, and in addition, from background geothermal heating. None of these will have any impact on the Arctic sea ice as the heat is trapped in the deep ocean and is unable to communicate with the upper ocean and sea ice. However, heat store in the Atlantic Layer (temperature maxima at ~300 m) and in waters of Pacific origin (maxima at ~50 m depth in the western Arctic) are prime candidates for releasing heat to the underside of the Arctic ice.

    I hope this helps and let me know if you want more info.

    Cheers, Peter

Jamie Morison, University of Washington (I went with Dr. Morison and the rest of the North Pole Environmental Observatory team to the North Pole sea ice in 2003):

    It occurs to me that we have primary evidence that heat from the bottom is not reaching the ice. Temperature profiles from virtually everywhere in the Arctic Ocean display a maximum temperature at a depth from 200-400 [meters]. This is associated with the Atlantic Water entering the basin from the Norwegian Sea. Fundamental laws of physics require that below the depth of this maximum, the heat flux is downward. Very near the bottom temperatures have been found to increase with depth indicating a small upward heat flux from geothermal sources, which help to heat only the very deepest water.

    The heat flux above the Atlantic temperature maximum is upward. The rate of this flux of Atlantic Water heat flux is variable depending on depth of the maximum and overlying stratification (stratification is controlled by salinity in the Arctic Ocean). Treshnikov estimated it from Atlantic Water heat content to be a couple of Watt/m2 in much of the Euarasian Basin. It is smaller farther from Fram Strait and greater near Fram Strait. How this flux changes is potentially very important to the ice cover. Changes in geothermal heat flux are not.

    Jamie

Timothy Stanton, Naval Postgraduate School (was on team I accompanied to the North Pole):

    Andy,

    I agree with Jamie – the thermal structure is dominated by the Atlantic water maximum temperature which is trapped in a strongly stratified upper ocean. We have just submitted a paper to JGR that looks at these upper ocean fluxes measured with thermal microstructure and CTD for the year-long SHEBA experiment. This shows upward fluxes through the top of the pycnocline of about 1 watt in the Beayfort Sea, and 2-3 watts over the Chukchi Shelf, an area influenced by the Pacific inflow. The other replies suggest volcano input is comparable to the background geothermal flux, which in turn is much less than the fluxes through the pycnocline from the warm Atlantic water, and to a lesser extent, the Pacific inflow.

    Tim

    Associate Research Professor Tim Stanton
    Code OC/St, Department of Oceanography
    833 Dyer Road, Room 329C, Building 232
    Naval Postgraduate School
    Monterey, CA 93943

Jeff Severinghaus, Scripps Institution of Oceanography

    I get this question too - and my usual response is to say, the average heat added from volcanoes to the ocean is of order 0.1 Watt per square meter. But the heat added (or removed) to the ocean from the sun and atmosphere is of order 100 Watt per square meter. So it is very hard for volcanoes to compete. Someone probably has much better estimates than these.

    – Jeff

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