Category: blog

1st Quarter 2020 Market Commentary

Note: This market review was published on January 14th, 2020 and may not be reflective of current market or investing issues.

In contrast to major lows at year end 2018, the end of 2019 saw major U.S. indices at or near record highs. The fourth quarter saw much lower volatility than the middle of the year as the markets continued mostly higher with only a few minor pullbacks along the way. Many of the risks that were influencing markets throughout the year are still relevant today; however, most of them have shown signs of moving toward a resolution.  There have been more negotiations in the U.S.-China trade war, and they are finally showing signs of progress, tensions in the Middle East seemed to have peaked for now, and the latest deadline for Brexit is less than a month away.

In their fourth quarter meeting, the U.S. Federal Reserve stopped the interest rate easing cycle, for now, and left their benchmark rate alone following three consecutive cuts during the year. The future path for the Fed is still in question however.  Chairman Powell has said that the three cuts during the year were simply a mid-cycle correction to interest rates and do not point to a long-term easing cycle.  Although the Fed has stopped their interest rate cuts for now, they have been forced to continue to increase their balance sheet through an asset purchase program in order to continue to provide liquidity to overnight lending markets.  While it continues to be talked about as a short-term issue, there has been continuous intervention through the fourth quarter and plans to halt the asset purchases have continued to be delayed.

The trade war between the U.S. and China is finally starting to show progress and talks are finally starting to look like they could bring results over the coming months.  The first phase of the deal has been verbally agreed to and is expected to be signed in mid-January.  While many details of the first phase have not been shared publicly, it is expected to include China increasing purchases of U.S. agricultural products and increasing intellectual property protections, while the US is likely to end any tariff increase. That said, phase two of a long-term deal could be years away.

Geopolitical tensions continue to be a threat. Protests in Hong Kong have continued throughout the past few months, despite the government removing the controversial extradition bill that provided the initial spark for the protesters.  While the first of the protester’s five major demands has been met, in the removal of the bill, the remaining four have seen little interest from the government. In the Middle East, following U.S. airstrikes on Iranian-backed rebels, protesters occupied the Green Zone in Iraq and were able to break into the compound surrounding the U.S. Embassy.  While the situation de-escalated after a few days, the United States then killed Iranian General Qassem Soleimani, to which the Iranian military responded by launching rockets at bases in Iraq that house American troops.  While there were no casualties reported in the attack, it showed that Iran is willing to use military force if they deem it necessary. This has been reported as the end of the retaliation from Iran and both sides seem to be standing down, for now. Over the next few months global growth could begin to rebound off of recent lows due to the stimulus that has been provided over the past year.  This growth will likely be supportive of risk assets over the next quarter, with international markets expecting out-performance relative to the United States as the dollar begins to weaken. While a recession in the United States continues to be a threat, one is not expected during the first three to six months of 2020 unless there is a significant unforeseen event.

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.



Secure Act Bring Changes to Your Planning – Part 1

Over the summer of 2019, the House of Representatives passed the bipartisan Setting Every Community Up for Retirement Enhancement (SECURE) Act. On December 19, 2019, the Senate passed the bill, and it was signed into law by the President on December 20, 2019.

The bill affects many Americans and may potentially result in the update of many financial plans here at Longview. The bill is long and covers many areas including the following:

  • Required Minimum Distributions from qualified accounts
  • Contributions to Traditional IRAs past the age of 70.5
  • Changes to the stretch provision in Beneficiary IRA accounts
  • Updates to exceptions of penalties for early distributions from accounts
  • The use of 529 accounts to pay off qualified education loans.

There is a lot to cover! Over the next few weeks, I will be breaking down certain areas of the SECURE Act into a series of blog posts. In this post, we’ll start with the updates to Required Minimum Distributions (RMDs) from qualified accounts, which include vehicles like Traditional and Rollover IRA as well as 401(K) and 403(B) accounts that are in your name.

Required Minimum Distributions

As many of you are well aware, the magic age of 70 and a half (70.5) signifies the start of Required Minimum Distributions – a time in which you have to distribute a portion of certain types of accounts. The amount distributed is based on the balance of the account at the end of the previous year and a divisor based on your age at the current year. Let’s break that down a little more using Steve as an example:

Steve is 74 as of January 1, 2020, and his birthday is December 2. On December 31, 2019, Steve had an IRA that totaled $1,085,000. With his birthday in December, that means that Steve will be age 75 as of December 31, 2020, which will make his RMD divisor 22.9. So, knowing those two numbers, this is how we determine Steve’s RMD.

$1,085,000/22.9 = $47,379.91

As you can see, Steve must take $47,379.91 by December 31, 2020, and report that distribution as income on his 2020 tax return. Failure to take the distribution means he would face a 50% penalty on the amount in which he failed to distribute. To get a better understanding of what your RMD may look like, check out the IRA Required Minimum Distribution Worksheet from the IRS.

So, what does this have to do with the SECURE Act? RMDs are still the same in that a portion will need to be distributed based on your age in the current year; however, the age in which an individual has to start RMDs is now age 72 but only for those turning 70.5 after December 31, 2019. So, for those born before or on June 30, 1949, sorry, you still have to take Required Minimum Distributions starting at age 70.5.

As for those born on or after July 1, 1949, you will not have to start taking RMDs until you reach age 72. Let’s use Sue as an example as to how the change in the law will work now:

Sue’s birthday is July 11, 1949. In her annual meeting in 2019, Sue’s advisor told her of her upcoming RMDs starting 2020, given the fact that she would not turn age 70.5 until January 11, 2020. With the SECURE Act now in place, her RMD does not have to start until at least 2021, which in turn may present opportunities to consider and implement from both a financial and tax planning perspective.

One thing to note about her first RMD that is very similar to the former distribution rules is that she will not officially have to start taking her RMD until April 1 following the year that she reaches her RMD age. Under the old RMD rules, while she would have turned 70.5 in 2020, her first RMD would technically not have to be taken until April 1, 2021. The only caveat is that she would have to take her 2020 and 2021 distribution both in 2021, which would raise the amount of tax she would have to potentially pay on her 2021 tax return.

With the new RMD rules, Sue doesn’t have to take her first RMD until April 1 in the year following her 72nd birthday, which would be April 1, 2022. Again though, like before, if she did move forward with that, she would need to take both her 2021 and 2022 RMD in 2022 and report both of them on her tax return. Sometimes, this may make sense, but before implementing that, we strongly encourage you to speak with your financial planner before to see if it makes sense from a taxation standpoint, because it could affect not only the taxes paid but also your Medicare premium in future years. 

Qualified Charitable Distributions

For many of our charitably inclined clients, we may make a recommendation for them to complete a Qualified Charitable Distribution (QCD). For those who are unaware of what this is, when an individual reaches age 70.5, they can take their RMD or a portion of it (up to $100,000) and have that money sent directly to a charitable organization. The amount that is contributed by way of QCD is not counted towards any income on the income tax return. This has become even more important over the past couple years with the recent Tax Cut and Jobs Act of 2017, which increased the Standard Deduction, thus for many Americans there isn’t a tax benefit from an itemization standpoint of donating to a charitable organization.

The QCD has created a new way of making charitable donations a de-facto tax benefit. Here’s an example: 

Let’s say that Joe is 75 and has to take an RMD of $50,000. Joe is also charitably inclined and would like to give $10,000 to his favorite charity, but will still take the Standard Deduction on his tax return. With a QCD, Joe can take $10,000 from his RMD, give that directly to the Charitable Organization and then only have to report $40,000 towards his income on the tax return.

The QCD has always coincided with age 70.5 and the RMD age. Going forward, under the SECURE Act, while the beginning RMD age has changed for some, the QCD age will remain at age 70.5, meaning that an individual may have a couple of years to give from their qualified accounts before their RMD start age of 72. This, in turn, not only contributes to the goals for those who would like to give to charity but may also lower future RMDs, thus potentially lowering future tax liability too. As with any distribution strategy from your accounts, please consult with your financial planner to determine the most appropriate action to take that is in line with your goals, as well as provides benefits for you both now and in the future.

2019 HudsonAlpha Tie the Ribbons Event

Jessica, Chad, Lauren, Jonathan, and Debbie attended the 2019 Tie the Ribbons event held at the VBC North Hall. The annual event was informational and moving, as always.

HudsonAlpha Institute for Biotechnology‘s breast and ovarian cancer research team of scientists are “committed to the goal of using genomic science and HudsonAlpha’s state-of-the-art technology to find new breakthroughs in breast and ovarian cancers.”

To learn more about the event, visit https://hudsonalpha.org/foundation/tie-the-ribbons-event/

Record Donations During Longview’s Huntsville Open House

We held our annual Open House event at our Huntsville office on Tuesday, October 22nd. Once again, we partnered with the Food Bank of North Alabama to collect non-perishable items.

Thank you, thank you, thank you to all of you who came out and donated! We collected 357 lbs., a record amount of goods. We truly appreciate your willingness to give. Thank you for spending some time with us!

4th Quarter 2019 Market Commentary

Note: This market review was published on October 16th, 2019 and may not be reflective of current market or investing issues.

The third quarter of 2019 was a wild ride for U.S. Markets.  The S&P 500 hit a new all-time high of 3,027.98 in July only to sell off more than 6.5% by early August. Many of the risks that were influencing markets in the second quarter are still relevant today.  There has been little progress made in the trade war between the United States and China, tensions in the Middle East have continued to escalate, and the latest deadline for Brexit is less than a month away.

During the third quarter, the Federal Reserve followed through on their dovish commentary by cutting their benchmark rate by 0.25% in July and September. The future path for the Fed is still in question however.  Chairman Powell continues to say that these rate cuts are not part of a cyclical change, rather a mid-cycle correction, meaning that he would prefer not to continue to cut rates in the future.  In addition to rate cuts, the Fed also had to intervene in over-night lending markets in order to provide liquidity as there have been multiple spikes in the overnight rate due to a lack of dollar liquidity.  If the dollar liquidity issue continues, and the Fed is unable to provide sufficient capital through their current repo operations, a new quantitative easing (QE) cycle might begin.

The trade war between the U.S. and China has seen little progress with increased tariffs from both sides.  Tensions have come down over the last few weeks as a potential deal has been tentatively reached.  The deal is said to be implemented in phases with the first phase being China purchasing more American agricultural products, primarily soy beans, and the United States agreeing to stop increasing tariffs.  No tariffs have been removed at this point; however, pending the first phase of the trade deal, some tariffs have been delayed from the third quarter to the end of the fourth quarter after the holiday shopping season.

Tensions in the Middle East continue to be a significant threat, especially to the oil market.  Oil had its largest one day move in history in September following an attack on the largest oil refinery in the world, located in Saudi Arabia. The United States has blamed Iran for the attacks, which has continued to degrade relations between the two nations.  While there has not yet been a response to the attack, it is unlikely that tensions will subside anytime soon.

Over the next few months it is likely that central banks around the world will continue stimulus both by cutting rates and by resuming, or increasing, QE. Earnings for U.S. companies are likely to disappoint when they report third quarter results, which could lead to a short-term consolidation in equity markets.  As central banks continue to provide stimulus, we will likely see equity markets pick up later in the fourth quarter or early in 2020, although a global recession continues to be a viable threat.

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

Guest Post: Planned Giving with Food Bank of North Alabama Development Director, Bobby Bozeman

Considering where you’re reading this, I’m going to assume that you already have a pretty good idea of why planning gifts to non-profits, whether from your retirement plan or a bequeath from your will or life insurance policy, is good for you. There are, of course, the great tax reasons, and they are incredibly flexible, but it’s also many people’s only opportunity to leave their charities of choice with that major gift they’ve always wanted to give but haven’t been able to.

A planned gift also allows donors to create a legacy. It doesn’t just leave a lasting mark on the charity or non-profit you choose to give to, but it also creates a lasting impact on your community, leaving the world a little better than what you inherited. 

And on our end of things, planned giving is extremely important as well. Over the rest of 2019 and through 2020, the Food Bank of North Alabama will be putting forth a campaign to inform our supporters about planned giving options as well as creating a society to honor those who choose to consider the Food Bank in their planned gifts.

We’re wanting to make this push with our current supporters and with new potential ones because planned giving provides a sturdy foundation of long-term support. While it’s tempting for me as development director to focus on gifts that come in right away and make an immediate impact, I want to make sure we have long-term stability. Because there are so many agencies — over 260 soup kitchens, food pantries, churches, women’s shelters, halfway homes, child backpack programs, senior feeding programs and more — across North Alabama that depend on us for food, it’s so important that we are here for as long as people are hungry. Planned giving allows us to better navigate any unforeseen problems that might be awaiting us on the horizon.

The Food Bank of North Alabama was honored to be featured in this blog in 2016, but I wanted to share a few ways we’ve grown since then. Many of our programs have changed, most morphed into new programs with new names as new staff members take hold of them.

But the biggest change since 2016 is how much food we’ve been able to provide the people of the 11 counties in North Alabama that we serve. Then we supplied nearly seven million pounds of food to over 200 charitable feeding programs. This year, we are on track to supply 10 million pounds of food to over 260 charitable programs. It’s all because people who choose to support us. 

If you’d like more information about the Food Bank of North Alabama, please visit foodbanknorthal.org, and for more information about planned giving or to let us know you’ve made a planned gift to the Food Bank, email Bobby Bozeman at bbozeman@fbofna.org.

Sonny Hereford Cheese Distribution

Community Foundation of Greater Huntsville’s 2019 Summit on Philanthropy

Longview team members, JJ, Jessica, and Andrew recently attended the Community Foundation of Greater Huntsville’s Summit on Philanthropy. The Summit is “an annual celebration of our community’s generosity because we believe that together we can accomplish more than any one person, one company, or one organization can accomplish on their own.” The gala-style event, celebrating its 10th year, was held on Tuesday, September 10th at the Westin Huntsville in Bridge Street Town Centre.

Longview has long been a supporter of the Foundation’s work in our communities, and we are proud to continue our sponsorship of the Summit. Jessica Hovis Smith and Jeff Jones are both members of the Community Foundation’s Philanthropic Advisors Network. Please contact us if you are interested in learning more about The Community Foundation or would like to talk about your desires to become involved or create your own giving plan. You can also learn more by visiting the Community Foundation’s Web site at communityfoundationhsv.org.

Jeff Jones, Jessica Hovis Smith, & Andrew Gipner

ELM Foundation’s Little Miracle’s Luncheon

Longview team members attended the ELM Foundation’s Little Miracles Luncheon on Thursday, September 5th, 2019 at the Jackson Center. They keynote speaker was Captain Mike Rose. From their website:

Huntsville resident, Capt. Mike Rose, served as a Special Forces Medic with the Army’s 5th Special Forces Group during the Vietnam War. He was awarded the Medal of Honor for his acts of bravery and selflessness as he risked his own life to save the lives of others while facing a well-armed and numerically superior hostile force deep in enemy territory. Captain Rose faced enemy fire numerous times to tend to the wounds of his comrades, estimated to be half of the company’s personnel. His actions serve as an example of grit, perseverance, and selfless service–values central to the work of the ELM Foundation.

ELM stands for Expect Little Miracles. The Foundation is a 501(c)(3) organization based in Huntsville, Alabama. They have awarded over $1,000,000 to over 300 participants since being founded in 2012. They “work with individuals and families who are doing the best they can and who need a ‘little miracle’ to help them achieve success. We work with the participant to establish long term goals using strengths, resources, and assets to fill gaps between problems and solutions.” To learn more about the ELM Foundation, visit them online at expectlittlemiracleshsv.org. While there, you can read about success stories, learn about their mission, find ways to give, and learn more about their grant process.

Lauren, Jonathan, Chad, Wes, Jessica & Andrew

Long-Term Care Insurance Premium Increases Expected for 2020

A recent article in Investment News reported that “roughly 40 to 45 states have approved ‘significant premium increases’” on many long-term care insurance policies. Author Greg Iacurci further reports that Genworth “received approval in Q1 to increase premiums an average of 62%.”1 This is nothing new given the premium hikes many policyholders received in 2017 and 2018, but the next round of hikes could be unprecedented. Some policies could see a 200% to 300% increase!

Premium increases will not be immediate. Most providers notify policyholders of the increase when annual premiums are due. So, policyholders may not see a rate hike notification for many months.

According to Genworth2, one of the largest issuers of long-term care insurance policies, “more people are keeping their policies than originally anticipated.” Increased cost to providers is also due in part to longer lifespans and the length of long-term care stays. This has led to an overall increase in claims, thus more money is being paid out by providers, and they are faced with having to cover these unanticipated claims.

Many policyholders will face a tough decision. When premium hikes are implemented, many insurance providers will provide a couple of options. Policyholders can maintain their coverage as is and pay the higher premium, elect a lower premium while cutting back on benefits, or allow the policy to lapse. The option for cutting back on benefits may allow policyholders to adjust their benefits paid amount, decrease their rate of inflation protection, shorten their benefit period, lengthen their elimination period, cancel riders on the policy, or some combination thereof.

John Hancock, may offer another option: elect a co-pay on your long-term care insurance costs. The co-pay would work very similar to the medical insurance co-pay process by allowing the policyholder to pay for a percentage of the expense while the insurance company pays the rest. It is not yet clear if John Hancock will make it available to existing policyholders or if the new co-pay election will only be available to newly issued policies. Given the nature of this new type of offering, state regulators will likely have to approve the option.

Before making a decision, talk to your financial advisor to see how the option fit your plan.

1 ttps://www.investmentnews.com/article/20190507/FREE/190509943/states-approving-bigger-rate-increases-for-long-term-care-policies

2 https://www.genworth.com/customer-service/ltc-premiums/why-increases-are-needed.html

2nd Quarter 2019 Market Commentary

Note: This market review was published on July 18th, 2019 and may not be reflective of current market or investing issues.

U.S. Markets ended the second quarter near fresh all-time highs, but the path taken to get there was far from smooth.  We saw the return of volatility to its highest levels since the major sell-off in December 2018 with the volatility index nearly doubling to over 20 in the first half of May before slowly returning to the lower teens by the end of the quarter.1  This volatility was influenced by multiple factors, including the continued trade war between the United States and China (the two largest economies in the world), the increasing tensions in the Middle East (with Iran saying that there is no longer a path to a diplomatic solution with the United States), and the Federal Reserve’s lack of clarity on their future policy. 

The Federal Reserve has continued to hint that a rate cut is coming, but we still lack clarity on when the first one will be and how much it will be cut.  The market is currently assuming a rate cut of at least 0.25% and as much as 0.50% in July.2 If there is no cut in July, it could bring a short-term consolidation to equity markets in the U.S. as investors wait to find out what the Fed’s outlook on the economy means for risk assets.

The trade war between the U.S. and China saw talks break down in the early part of last quarter with increased tariffs from both sides.  Tensions cooled slightly after President Trump and President Xi met at the G20 summit in June and agreed to restart trade negotiations between the countries and to put any further tariffs on hold.  No tariffs have been removed at this point; however, trade talks have resumed and both sides say that there is a path to a deal.

Tensions in the Middle East continue to be a significant threat, especially to the oil market.  In the last three months there have been attacks on oil tankers in the Strait of Hormuz, for which Iran has denied responsibility. Also, a U.S. drone was shot down, for which Iran claimed responsibility stating that the drone had illegally entered Iranian airspace.  Tensions in this region continue to rise with Iran saying there is no longer a path to a diplomatic solution with the United States. These tensions arose after the U.S. decided to reimpose sanctions on Iran that had been removed as part of the nuclear agreement between Iran and the international community.

While new all-time highs are being reached in U.S. stock markets, global stocks have not fared as well since the last recession.  The MSCI EAFE index (a broad measure of international equity) reached its most recent peak in early 2018, but has yet to return to the all-time highs that were seen in 2007.3 Economies outside of the U.S. have not had the same success throughout the recovery since the Great Recession and their stock markets reflect that.

Over the next few months it is likely that China will increase government stimulation in their economy in order to combat declining growth. The European Central Bank (ECB) will likely continue their policy of easy money and could possibly increase stimulus. The Federal Reserve will likely cut rates by at least 0.25% over the next three months which will confirm their change in policy from the last rate hike in December 2018.  All of these factors could be supportive of global economic growth which should be positive for global equities. 

Sincerely,

Longview Financial Advisors, Inc.

1, 2, and 3: Information found at CNBC.com

Disclosure: Please remember that past performance may not be indicative of future results.  Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by  Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful.  Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions.  Moreover, you should not assume that any discussion or information contained in this newsletter serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing.  Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available upon request.

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Disclaimer

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Longview Financial Advisors, Inc.), or any non-investment related content, made reference to directly or indirectly in this newsletter or post will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this newsletter or post serves as the receipt of, or as a substitute for, personalized investment advice from Longview Financial Advisors, Inc.. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Longview Financial Advisors, Inc. is neither a law firm nor a certified public accounting firm and no portion of the newsletter or post content should be construed as legal or accounting advice. A copy of the Longview Financial Advisors, Inc.’s current written disclosure statement discussing our advisory services and fees is available for review upon request.


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