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Dwyane Wade and Luol Deng Player Option Decisions Loom

June 28th, 2015 3 comments
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Update (7/1/15): Luol Deng has exercised his player option. Dwyane Wade declined his option but his return is all but assured. The larger question is to what type of contract the Heat will sign him.

Ken Berger at CBS reported yesterday that the 2015-16 salary cap could jump as much as $2 million higher than the league’s latest projection of $67.1 million, which was made some time ago. Such an increase could have a meaningful impact on the Heat’s plans for Wade.

If the 2015-16 salary cap increases from $67.1 million to as much as $69.1 million, the tax threshold would increase from $81.6 million to as much as $83.8 million.  

How much would a $2.2 million increase in the tax threshold help the Heat? If it were to offer Wade a one-year contract at the $22 million max, its payroll would reach into the neighborhood of $100 million. With an $100 million payroll, the tax obligation would fall from $58 million to $49 million. That’s a savings of $9.4 million! 

Layer in a potential trade of Josh McRoberts, Chris Andersen or Mario Chalmers and Heat’s total payroll obligations, including repeater tax obligations, could fall to $12X million. 

And since the luxury tax is calculated as of the last day of the regular season, any potential trades don’t need to happen now (though the clarity would certainly be reassuring). Trading, say, the $1.6 million in salary obligations remaining on the $5.0 million expiring contract of Andersen at the trade deadline — for which the Heat could offer up to $3.4 million in cash and/or a possible 2018, 2020 or 2021 second round draft pick — would save a whopping $18.4 million in taxes for a team with an $100 million payroll (plus the $1.6 million in salary savings, less any cash sent). However, the Heat would need to find a trade partner with enough cap room (or a large enough trade exception) to take on Andersen’s $5.0 million cap hit without sending anything back in return, and that gets harder to find as more time passes.

Winding up with total payroll obligations of $12X million is a hefty some of money, to be sure – a would-be all-time record in total payroll obligations for the Heat – but this is not your typical spending problem. It would be just a one-time issue. The Heat will become very affordable next year, all but assured not to cross the tax threshold. Which would guarantee it does not pay “repeater tax” rates again until at least the 2019-20 season (pending rule changes). Also bear this in mind: the new TV deal, which starts in 2016-17, will itself instantly increase owner PROFITS by an average of $18 million per year, and rising annually. So, would Arison be willing to endure the cost of giving Wade the max for one year?

What would offering Wade a one-year contract at the $22 million max mean for the Heat? The Heat could enter the summer of 2016 with Dragic (PG), Winslow (SG/SF) and Bosh (PF) under contract, and up to $42 million of cap space to spend on Whiteside (C) and another player (assuming a McRoberts trade and an $89.1 million salary cap). Of that $42 million, Whiteside’s max would be $21 million but, at this point, one could reasonably suspect he would command far less. Which leaves enough room for…

That has to be math that the Heat organization itself is doing, right? Would they offer Wade one-year at the max? Would Wade accept?

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The wait is almost over.

NBA free agency officially begins at 12:01 am on July 1. But for the Miami Heat, the uncertainty starts to be clarified 23 hours and 58 minutes before that.

Heat guard Dwyane Wade and forward Luol Deng have until 11:59 pm on June 29 to decide whether to exercise the player options – for $16.1 million and $10.2 million, respectively – on their contracts. If the deadline passes and the Heat has not heard back, both players by default will have chosen to join guard Goran Dragic in opting out and becoming unrestricted free agents.

If Wade and Deng both opt out, the Heat would start the summer with as much as $19 million of room below the projected $67.1 million salary cap. But, realistically, it won’t have any cap room at all.

That’s because the Heat is expected to quickly resolve the free agency status of Dragic.

Dragic has indicated that he enjoys Miami, and will remain with the Heat if his financial goals are met. The Heat paid a steep price to get him, headlined by two future first round draft picks, which tells you everything you need to know about how willing they will be to pay him his money. Dragic will be eligible to receive a five-year deal, with a total payout of as much as $108 million. If he gets it, his contract would start at $18.9 million, and rise to $20.2 million for the 2016-17 season.

For a player entering his age 29 season, however, it could prove to be an overpay, even with the cap due to rise dramatically next year. A smaller deal that pays out the max in the first year, declines by the max in the second year, before again maxing out for the final three years would be a nice concession by Dragic, in that it would give the Heat more flexibility for the summer of 2016 but still pay out a lofty $97 million. That may still seem like a hefty sum, but it would represent a 10 percent discount from a max contract, and a whopping 30 percent discount from a potential max contract a player of his tenure could sign the following summer. If he acquiesces, his contract would still start at $18.9 million, but his 2016-17 salary would fall to $17.4 million.

If the Heat re-signs Dragic, it would still be capped out even if Wade and Deng decline their options. Utilizing cap space, therefore, is not a realistic option for the Heat this summer.  Read more…

Is Kevin Durant at the Root of Dwyane Wade-Miami Heat Divide?

June 2nd, 2015 7 comments
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The sharp divide between Dwyane Wade and the Miami Heat represents a unique challenge for team president Pat Riley.

For the past 12 years, the Wade name has been synonymous with that of the Heat organization. Wade has often been viewed as an extension of it, and perhaps its most vital member. He has advocated for it. He has delivered it fans, players, titles and money. He has sacrificed a great deal of personal earnings for the benefit of it.

Riley would love to reward him for everything he has done. But in a world of salary caps and luxury taxes, where championship aspirations are a way of life, doing so becomes a sentiment that is far more easily felt in theory than delivered in practice.

Wade has unquestionably been the biggest star of the Heat’s past. But Riley needs to consider its future. Time marches on. Skill-sets erode. Injuries mount. What is best for Wade may no longer be what is best for the Heat organization, and that’s where things get dicey.

Riley has always dreamed big. In the past decade, he’s acquired Shaquille O’Neal and LeBron James — arguably the NBA’s two greatest post-Michael-Jordan era players — and paired them with Wade to secure the franchise’s five NBA finals appearances and three titles.

It would not be difficult to suspect that he has visions of grandeur once again – this time with his sights set on 2016, when Kevin Durant and a host of others hit the market in the first summer under a new TV deal that could send the NBA salary cap skyrocketing to $89 million.

To facilitate his vision, whatever it may be, Riley would strongly prefer that Wade opt into the final year of his contract for next season at $16.1 million, setting him up to become a free agent for the summer of 2016. This requires Wade to have a ton of trust, and the leap of faith that Riley will ultimately take care of him.

Wade seems to prefer to decline his player option and seek the security of $20 million annually to close out his Hall of Fame career. The rift has led to speculation that Wade’s long-term future with the Heat could be in doubt.  Read more…

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Dwyane Wade’s Contract Negotiations with Miami Heat Stall

May 29th, 2015 9 comments
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What was thought to be a relatively straightforward summer for the Miami Heat has hit a snag over contract talks with Dwyane Wade.

Wade must decide by June 29 whether to opt out of the final year of a contract that would pay him $16.1 million next season.

The star shooting guard hinted last month that he intended to exercise his option, a heavily-preferred scenario for the Heat organization. However, the 33-year-old is now considering the possibility of opting out in order to secure one last lucrative long-term deal, and is reportedly willing to test the open market and leave the Heat, if necessary, in order to get it.

There is believed to be a sizable gap between what Wade is demanding and what the Heat is offering. That impasse has led to speculation that Wade’s long-term future with the Heat is in doubt.

Despite the uncertainty, it seems highly unlikely that the Heat would part ways with the biggest star in its history. Neither Wade nor the Heat would want such an outcome (nor would any other team in the NBA which Wade would consider likely be willing to pay him what he seeks anyway). Such tensions are merely a tactic employed by either party to gain leverage during the very early stages of what figures to be a challenging multi-month negotiation. But there are real concerns that underlie such posturing.

Wade’s desire for one last big contract from the Heat can easily be justified: He has guided the Heat to five NBA finals and three titles, he played a critical role in luring LeBron James and Chris Bosh to Miami, he has comported himself with class over the course of a brilliant twelve-year career, and he has sacrificed substantial salary in order to give the Heat flexibility over the past five years.

Last summer, in order to give the Heat flexibility to augment its roster, Wade opted out of the final two years of a contract that would have paid him $41.8 million. He instead accepted a rather shocking two-year, $31.1 million deal, which included a player option for next season.

As a result, over the first five years of what might have otherwise been the full six-year maximum contract we were all eager to give him to stay in the summer of 2010, Wade has now sacrificed a total of $18 million for the betterment of his team. If he were to exercise his option, that sacrifice would increase to $27 million.

It only seems natural, then, that Wade would want a show of appreciation in return.

Wade reportedly wants to opt out this summer, with the hope that the Heat would give him a three-year deal that would extend past his 36th birthday. The Heat would love to give it to him in theory, but paying him what he’s seeking would present significant challenges in practice.  Read more…

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Miami Heat Secure No. 10 Pick in 2015 NBA Draft

May 19th, 2015 No comments
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The Miami Heat officially received its expected consolation prize on Tuesday night for missing the 2014-15 playoffs by a single game: the tenth pick in the 2015 NBA Draft, which will be held on June 25 in New York City.

After finishing the regular season with a 37-45 record, the tenth-worst in the league, the Heat had an 87.0 percent chance to secure the pick.

The challenge for Pat Riley and the front office will now be to utilize the pick to identify a player who can address critical areas of need off the bench for the Heat next season, but perhaps equally importantly develop into a starter for 2016 and beyond.

Heat Lottery Picks

Miami’s 11 previous lottery picks.

The Heat has had a good deal of success with its lottery selections in the past (e.g., Dwyane Wade, fifth pick in 2003), but such success has been far from guaranteed (e.g., Michael Beasley, second pick in 2008).

This marks the twelfth time in team history that the Heat has held a lottery pick, and just the fourth since the turn of the century. The expansion-era Heat held six consecutive such picks from 1988 through 1992 (including two in 1990) and, after trading away what would become a lottery selection in 1993, two more in 1994 and 1995.

With its only two previous tenth overall picks in team history, the Heat drafted Kurt Thomas in 1995 and Caron Butler in 2002.

With the stakes rather high this time around, the Heat are hoping for similar success. The current Heat team is both extremely expensive and deeply flawed, with an obvious need for depth at the wing positions, in the form of players who can space the floor and play solid defense. The Heat may not have too many options to address those needs in the years ahead. It will very likely have only the smaller $3.4 million taxpayer mid-level exception with which to improve this summer (and may even bypass using it), and a significant portion of the expected salary cap flexibility for the summer of 2016 could be allocated toward securing the services of Hassan Whiteside for the long-term. A high draft pick this year represents a unique opportunity for the Heat: the chance to snag a very good player at a very inexpensive price for at least the next four years.  Read more…

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A Preliminary Look at the Miami Heat Offseason

April 22nd, 2015 4 comments
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If you enjoy my writing and have the means and desire to do so, please donate. 

I have another request as well. I write primarily for myself. I don’t do it for recognition. I don’t get compensated for it. I write posts which I believe are unique, more in depth and more insightful than I can otherwise find elsewhere. I hope you agree. It therefore feels rather awful to see my work being exploited for the personal gain of others. If you would like to leverage it, I ask that you please properly source it (or, at the very least, donate).

“I know one thing about the Miami Heat organization. We don’t just sit around and hope. We get to work.”

That was Dwyane Wade speaking to the media, describing what his team’s front office will do this summer to improve upon a team which, despite the loss of its best player and the significant injuries it thereafter endured, still managed to grossly underachieve along the way to its first pre-playoff exit since 2008.

But it won’t be easy. Pat Riley will face severe salary cap limitations and luxury tax restrictions as he sets out to improve the Heat’s roster.

All 15 players on the Heat roster are under contract through next season, but the status of seven of them has yet to be determined. Wade, Luol Deng and Goran Dragic have player options which need to be exercised by June 29, Michael Beasley has a team option on his minimum salary contract which needs to be exercised by June 29, and James Ennis, Tyler Johnson and Henry Walker have non-guaranteed minimum salary contracts that can be terminated cost-free at any point prior to August 1. Hassan Whiteside also has a non-guaranteed contract at the minimum salary, but his status as a continuing member of the Heat organization is certain.

Assuming Wade exercises the option on a contract that will pay him $16.1 million next season (as he has said he will do), the Heat will start the offseason well above the projected $67.1 million salary cap unless two things both happen: Luol Deng declines his $10.2 million option and Goran Dragic leaves.  Read more…

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NBA Issues Updated Salary Cap Guidance to Teams

April 17th, 2015 No comments
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I have a request. I write primarily for myself. I don’t do it for recognition. I don’t get compensated for it. It feels rather awful to see my work being exploited for the personal gain of others. If you would like to leverage it, I ask that you please properly source it (or, at the very least, donate).

At the Board of Governors meetings in New York, NBA teams were advised that the league expects the salary cap to increase from its current $63.1 million figure to $67.1 million next season and $89 million in 2016-17, while the luxury tax is expected to increase from its current $76.8 million figure to $81.6 million next season and $108 million in 2016-17.

The figures are non-binding forecasts that have been circulated several months before the official salary cap and luxury tax threshold for the 2015-16 season are announced on July 8 following a league-wide audit (that is what July Moratorium is for).

As part of the audit, accountants jointly appointed by the NBA and the players’ association will finalize the total revenue haul for the past season and, on that basis, project the revenues for the year ahead.

They will then take 44.74 percent of that projected amount, subtract projected benefits, and divide by 30 (the number of teams in the league) to get the salary cap for the season ahead. Adjustments are then made to the cap if players received way too much, or too little, in salaries and benefits for the then prior season relative to the finalized revenue figure; this serves as a mechanism to maintain the integrity of the agreed-to revenue spit between owners and players. The luxury tax uses a similar formula, but is based on 53.51 percent of projected revenues.

The latest projections suggest that the revenue haul for this season is expected to be much stronger than originally forecasted.

The league initially forecasted revenues for the 2014-15 NBA season of $4.66 billion when the current collective bargaining agreement was drafted back in 2011. The forecast was revised upward to $4.71 billion last July, off of which projection the salary cap was based. Today’s announcement suggests the league is now expecting that when they are finalized in July, revenues will come in at approximately $4.78 billion.  Read more…

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With Injuries Mounting, Should the Miami Heat Tank?

April 4th, 2015 7 comments
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Update (4/15/15): The Heat finished the season with a 37-45 record, missing the playoffs by one game. The fate of their 2015 first round draft pick – which is owed to the Philadelphia 76ers, subject to top-10 protections – will be determined by the draft lottery, which will be held on May 19th. With the tenth seeding for the lottery, the Heat will have a 1.1 percent chance to draw the first overall pick, a 1.3 percent chance at the second overall pick, a  1.6 percent chance at the third pick, an 87.0 percent chance at the tenth pick, and a 9.1 percent chance to receive a pick which would need to be sent to the Sixers. 

The Miami Heat’s season of struggle is continuing on with full force.

Goran Dragic says his “body doesn’t feel right.” Dwyane Wade just re-injured his left knee, a few days after getting it drained of excess fluid. Luol Deng is suffering through a left knee contusion. Chris Bosh is out for the year as he recovers from a pulmonary embolism. His backup, Josh McRoberts, is out for the year as he rehabs from a torn right lateral meniscus. Hassan Whiteside is struggling through the effects of a huge gash on his right hand that required 10 stitches to close.

That’s all five Heat starters ailing during the most critical month of the regular season.

The Eastern Conference’s four-time defending champion and current eight seed is in danger of missing out on the playoffs for the first time since the 2007-08 season. And with its entire starting rotation battered, it’s unclear what damage they could cause in the playoffs if even they were to make it.

Amidst the struggles, an increasing group of frustrated Heat fans has begun to endorse an intriguing concept: Why not tank the rest of the 2014-15 season to get a better draft pick?

The Heat has already traded away its 2015 first round pick to the Cleveland Cavaliers (who then traded it to the Philadelphia 76ers) as part of the LeBron James sign-and-trade in July 2010. But that pick is top-10 protected through 2016, and unprotected in 2017.

The “protections” mean that if Miami ends up with a top 10 pick in the 2015 draft, the Heat would get to keep the pick, and its obligation to the Cavs would shift to the following year. If, instead, the Heat doesn’t end up with a top 10 pick, the pick would be conveyed to the Cavs and the obligation would be fulfilled. If the pick winds up shifting to 2016, the same rules would apply next year. If the pick has not been conveyed by 2016, it would get conveyed in 2017 no matter where it lands.

These “protections” serve as a protection measure for the Heat, so that they don’t give away a pick that is more valuable than it was intended to be. But they also mean that the Heat could intentionally tank the final seven games of the regular season in order to secure a top 10 pick, allowing them to keep the pick in what is widely considered to be a strong and deep draft.

Tanking could get the Heat a valuable pick in a strong and deep 2015 NBA draft(1).

Should they do it?  Read more…

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Chris Bosh Diagnosed with Pulmonary Embolism

February 21st, 2015 No comments
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Miami Heat power forward Chris Bosh received sobering news on Saturday. He suffered a pulmonary embolism, which will cause him to miss the rest of the 2014-15 NBA season.

Bosh was hospitalized at South Miami Hospital on Thursday but, amid a conflicting diagnosis, underwent further testing on Friday. The diagnosis was confirmed today.

This is a serious and scary condition, but according to Heat head coach Erik Spoelstra, Bosh avoided a potential life-threatening situation.

“Bosh… is currently resting comfortably. Chris is OK, and his prognosis is good,” the Heat said in a news release.

40410_1A pulmonary embolism(1) occurs when a substance – most often a blood clot, as is the case for Bosh – that develops in a blood vessel elsewhere in the body travels through the bloodstream to an artery in the lung and forms an occlusion (blockage). The obstruction, which blocks blood flow through the lungs and puts pressure on the right ventricle of the heart, can be fatal.

It is rare to have a single pulmonary embolism. In most cases, as is the case for Bosh, multiple clots are involved.

Blood clotting is a normal process that occurs in the body to prevent bleeding and promote healing after an injury. The body forms blood clots when the platelets within the blood encounter a damaged blood vessel, and then breaks them down as the damaged tissue heals. However, clots can form unexpectedly, without notice, and have dangerous consequences. They can happen to anyone for a number of reasons.

Almost all blood clots that cause pulmonary embolisms are formed in a deep vein of the leg (itself called a deep vein thrombosis). A piece of the clot breaks off from the wall of the vessel in the leg, travels via the bloodstream up the body, through the right side of the heart, and lodges in an artery of the lung.  Read more…

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Heat Acquire Goran Dragic From the Suns in Three-Team Trade

February 19th, 2015 No comments
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Note: This post was moved from being an update to a previous post to a new post on its own. The words, however, are the exact same.

The Miami Heat’s long, arduous search for an elite point guard is now over. The Heat has acquired what it hopes is its point guard of the future in Goran Dragic.

The Heat received Dragic and his brother Zoran Dragic from the Phoenix Suns as part of a three-team trade that involved the New Orleans Pelicans. In return, the Heat sent Norris Cole, Shawne Williams, Justin Hamilton and $369K in cash to the Pelicans and Danny Granger, $2.2 million in cash (equivalent to Granger’s salary for next season) and two future first round draft picks to the Suns. The Pelicans sent John Salmons to the Suns to complete the deal. Williams and Salmons will be waived by their new teams. By rule, Williams is not allowed to re-sign with the Heat.

The Heat have struggled thus far this season, their first since LeBron James left after a four-year stay in Miami to return home to Cleveland. But through the struggles has emerged a potential future star in Hassan Whiteside. Whiteside has been rampaging through the NBA with reckless abandon, utilizing his massive 7-foot-7-inch wingspan to throw down monstrous alley-oop dunks, snatch rebounds out of the sky from high above the rim, swat basketballs as Godzilla would planes, and generally wreak havoc on both ends of the floor. He will now have a first rate point guard off of whom to feed; the Dragic-Whiteside pick-and-roll pairing would seem as deadly as any in the league.

The addition of Dragic presents the prospect of a formidable starting lineup for the Heat, when healthy, in Dragic, Dwyane Wade, Luol Deng, Chris Bosh and Whiteside. It figures to be as talented as any in the Eastern Conference, outside of perhaps the Cleveland Cavaliers. If things go well, the Heat could challenge for an NBA title as early as this season, a concept which seemed all but impossible after James’ departure.

But, while the upside is both massive and readily apparent, this was a risky trade for the Heat.

Miami will send Phoenix the first of its two first round picks two years after its obligation to the Philadelphia 76ers is satisfied (most likely this season). That pick is top-10 protected in 2015 and 2016, and becomes unprotected in 2017 if not previously conveyed, meaning it will be sent to the Sixers in 2015 assuming the Heat make the playoffs. The pick to be sent to the Suns is top-seven protected in 2017 and 2018, and becomes unprotected in 2019 if not previously conveyed. Assuming the Heat don’t even up with one of the seven best picks in the draft in two seasons, it will be conveyed in 2017, but Miami could still wind up sending away a lottery pick.

The second first round pick goes to the Suns in 2021 with no protection whatsoever. The 2021 draft is a long ways away; there isn’t a single player on the roster whose contract extends out that far. There’s a long history of NBA teams making costly mistakes by not worrying about a seemingly distant future. One need only to imagine a scenario whereby an aging Heat team struggles to finish with one of the worst records in the NBA, only to have its premium draft pick stripped away, to see the risk.  Read more…

Goran Dragic to Miami Heat Would be Wonderful But Complicated

February 12th, 2015 No comments
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Note: In my effort to keep things organized, I have moved my update to reflect the acquisition of Goran Dragic to a separate post above. 

After LeBron James left last July, Miami Heat president Pat Riley said “I want this team to be as competitive as it’s ever been.” But he spoke of pursuing two simultaneous courses of action: trying to stay competitive for the following two seasons, while maintaining maximum flexibility for the all-important summer of 2016.

Riley acquiesced to those distinct courses of action by re-signing Chris Bosh and honoring his commitment to Josh McRoberts, contracts that weigh on the team’s summer of 2016 flexibility, but refusing to allow anything to increase the burden any further in filling out the roster.

The NBA has struck gold with the frivolous distraction that is professional basketball. The salary cap will explode higher than helium-sucking angels in the years to come, on the strength of an enormous burst in league-wide revenues. After a relatively tempered rise from the current $63 million to a projected $68 million next season, 2016-17 cap projections are expected to reach as high as $90 million (unless a salary cap smoothing mechanism is implemented), as the league’s massive new $24 billion TV rights deal takes effect.

With just the contracts of Bosh ($23.7 million) and McRoberts ($5.8 million) on the books, the Heat figures to have as much as $60 million of summer of 2016 cap space with which to work.

Will Riley again hit the jackpot in 2016, as he did in 2010?

Such a story could be painted: 2016 Hassan Whiteside could play the part of 2010 Dwyane Wade, the in-prime free agent superstar who loves Miami and recruits others to join him. He would be selling the opportunity to play alongside his dominant interior-oriented self and his ideally-suited perimeter-oriented frontcourt teammate Chris Bosh. He would be selling one of the NBA’s few universally appealing cities, an increasingly critical local income tax haven, as well as the organization’s track record of success.  Read more…

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