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View Full Version : Repatriated profits income tax amnesty? Apple has a pantload to spend!



John Bell
07-24-2012, 01:09 PM
I've heard a number of conservative talking heads tout the idea of granting amnesty for US firms repatriating foriegn profits back to the US as an economic stimulus. The idea is bringing all that money back would create a larger pool of capital for new investments in the US or could be paid out as dividends to stockholders, either of which would stimulate the economy when the money got spent over here. I've never felt much of one way or the other on this idea about whether or not it would have that much of stimulative effect because I didn't have any data. Today I read this AP article which makes me wonder if it wouldn't be a good idea.

http://www.ajc.com/business/how-apples-phantom-taxes-1483163.html


Like other companies, Apple typically keeps profits on overseas sales in overseas accounts. When someone buys an iPad in Paris or Sydney, for instance, the profit stays outside the United States.

Apple may pay some corporate income taxes on that profit to the country where it sells the iPad, but it minimizes these by using various accounting moves to shift profits to countries with low tax rates. For example the strategy known as "Double Irish With a Dutch Sandwich," routes profits through Irish and Dutch subsidiaries and then to the Caribbean.

When it comes to using creative tax techniques, Apple is no different from other multinational corporations, says Robert Willens, an independent accounting expert.

And just like other corporations, Apple leaves cash overseas. If it brought it home to the U.S., it would have to pay federal income taxes on the money (though it would get a credit for foreign taxes already paid). In Apple's case, those overseas accounts have grown to a staggering $74 billion — equal to the market value of Citigroup Inc.


Worthy idea or no? Discuss.

2MeterTroll
07-24-2012, 01:18 PM
Why not charge the grossly earning 1% in the US the same tax rate as percentage of income as everyone else and tax the corporations gross earnings toss in the other sheltered capgains and stocks as income and we could get this whole mess straightened out in a year or two. removed the deviation bait.

John Bell
07-24-2012, 01:30 PM
Throwing a yellow flag on you, 2metertroll. Discuss the idea please and don't try to change the subject. :)

2MeterTroll
07-24-2012, 02:05 PM
the fact remains that its a moot point when we are discussing this. an amnesty would not bring the money back into the system it would bring a very short term blush then after it made a huge killing in interest would end up off shore again. What the republicans are setting up is a game system folks who dont understand how money makes money wont get. the other scenario is that the money will become locked up in deferred interest accounts here in the US where no one can touch it. its a giant money laundering schema to clear the air for those who have money hidden offshore and want it in the US when the ball falls. The current situation is that the financial markets and banks in other countries are teetering some of those countries wont bat an eye about nationalizing the banking systems and accounts. Effectively removing that ill gotten cash from the field of play. lots of folks got lots of cash hid out there and its just sitting around waiting for some dictator to take it. basically many hold money off shore and draw on it as needed making the net worth low while never needing to show any actual taxable income. but the law now says you cant move really large wads of cash around without reporting it. the math is easy when it comes to folks wanting money in the mattress at home instead of in the Caymans


Throwing a yellow flag on you, 2metertroll. Discuss the idea please and don't try to change the subject. :)

John Smith
07-24-2012, 02:07 PM
My guess is that if the Republicans are pushing it, it's a bad idea. Everything they've told us or predicted in recent years has been wrong.

If they were playing the ponies, you'd not bet on the ones they pick.

BrianY
07-24-2012, 02:45 PM
I'm no expert, but it seems to me that this would not produce the desired effect at this point because companies already have too much cash on hand and are reluctant to invest it. Giving them more free cahs to play with isn't going to do much when they're already sitting on boatloads of it. They're waiting for consumer demand to pick up, bu that's not happening because the labor market is weak.

See http://www.npr.org/2011/08/17/139703989/companies-sit-on-cash-reluctant-to-invest-hire


In a recent report, Moody's said the 1,600-plus U.S.-based companies it rates had $1.2 trillion in cash at the end of 2010 — 11.2 percent more than they did a year earlier. Companies that have a lot of cash can use it to invest and hire.

That's what Caterpillar is doing, says spokesman Jim Dugan.

"In 2011, our plan for [capital expenditures] is $3 billion, which would be an all-time record for us," he says. The heavy equipment manufacturer plans to spend about $1.5 billion in the United States, Dugan says, "and the focus of cash for Caterpillar is growth."

But a lot of other companies right now are sitting on their cash — using it sparingly, if at all....


Companies can borrow money very cheaply right now, so instead of paying off their debts, they can sit on cash as long as possible. But there's a more basic reason companies are hoarding money: The U.S. economy simply isn't growing enough.

The labor market is weak, which hampers consumption, notes Charles Biderman, chief executive officer of the research firm TrimTabs. "So without growing income, where's the money to buy more stuff?" he says. "Absent a change in demand, the fact that companies have all this cash, well, good for them. It's not going to help us."

And with the economy limping along, companies are simply reluctant to invest and hire....

wardd
07-24-2012, 02:46 PM
didn't we try this before?

as i remember ford still laid off bunches

ljb5
07-24-2012, 03:09 PM
This has been tried before.

The end result was that companies repatriated a lot of money in ways that didn't do much to stimulate the economy, but rather just enriched shareholders.

It was actually counter-productive because companies started holding even more of their profits overseas in the hopes that they would again get the opportunity to 'repatriate' it at a reduced rate.

The law of unintended cosequences teaches us that if you cut them a little bit of slack once, they're going to want a whole lot of slack later.

http://www.brookings.edu/research/opinions/2011/06/27-corporate-tax-holiday-gale-harris


perhaps even more costly than the lost revenue, would be the dangerous precedent that firms would expect regular repatriation holidays. This expectation may persuade firms to hoard profits overseas and perhaps even move production abroad, betting that Congress will eventually grant another “one-time” tax break.

Indeed, the prior tax holiday was supposed to discourage firms from holding profits overseas. But instead, firms stockpiled new reserves, presumably in anticipation of another holiday. The Joint Committee on Taxation estimates that these two factors would contribute to the $79 billion 10-year price tag on a second repatriation

John Bell
07-25-2012, 10:48 AM
So how then do we incentivize investment, if this won't work?

Serious question and I'm not hearing any answers anywhere.

Kaa
07-25-2012, 11:08 AM
you can't 'incentivize investment'.

LOL. I bet this will be news to... a very large number of people :-)

Kaa

Kaa
07-25-2012, 11:54 AM
What I meant, of course, was providing incentives to invest capital in the production of goods or services, when the economics of doing so favor holding back on a pile of cash.

Let's express it more clearly -- it's hard to persuade private businesses to invest in something that looks like it will lose money :-) You *can* do it, of course, with a sufficient amount of grants and such (look at the "green" industry in the US), but it's expensive and kinda awkward (see Solyndra) :-D

But let me ask you -- do you think it's the lack of investment that's holding the US economy back? There's not enough capital, not enough money? Is that the binding constraint?

Or maybe you believe that the investors are stupid and their investments would actually make money if made?


In theory, Apple Computer could employ their $87B of cash in developing yet more new products.... but instead, it sits somewhere...

May I recommend to you a thread? http://forum.woodenboat.com/showthread.php?150524-Technological-pessimism

Kaa

ljb5
07-25-2012, 12:04 PM
So how then do we incentivize investment, if this won't work?

Serious question and I'm not hearing any answers anywhere.

Let's narrow down the focus and specify what type of investment we want: We want to stimulate employment -- which means hiring more people, building more factories, putting more equipment into factories, etc... (As distinct from paying dividends, doing stock buy-backs, accruing cash or paying bonues to execs.)

In general, companies only respond to customer demand. When they have customers, they increase capacity.... when they don't need increased capacity, they decrease output regardless of how much money they have on hand.

Many a profitable, cash-rich company has laid off employees. No company ever hires people because they feel like they have extra cash laying around. They only hire more people when they need them to do work to meet demand -- and then, only reluctantly.

Therefore, the only way to incentivize expansion is to create demand.

In the US, there are three general groups that contribute to demand. consumers, companies and the government.

Consumers and companies make their own decisions and have proven to be very resistant to incentives. The government is the only group in the US that can be direclty induced to increase demand.

Nobody seems to like government consumption... but when no one else is reliably consuming, they're the only ones who can do it.

ljb5
07-25-2012, 12:11 PM
Let's express it more clearly -- it's hard to persuade private businesses to invest in something that looks like it will lose money :-) You *can* do it, of course, with a sufficient amount of grants and such (look at the "green" industry in the US), but it's expensive and kinda awkward (see Solyndra) :-D

I can't tell if you're reading the sitatuion wrong or just applying too much spin.

If Solyndra were funded by private investment alone, it would be deader than a door nail... and sooner too.

Government loan guarantees certainly didn't save the company... but they helped to keep over 1,100 people employed for two years... purchase hundreds of millions of dollars of equpment from vendors, hundreds of millions of dollars in raw material, construction workers, outside contractors, etc.

That all had a very stimulating effect. People love to make a big deal about how Solyndra failed with government support, but they never seem to realize that it failed with private support too.



But let me ask you -- do you think it's the lack of investment that's holding the US economy back? There's not enough capital, not enough money? Is that the binding constraint?

Clearly, that's not the issue. There is plenty of money to be invested, but insufficient demand to motivate it.

There are very few entities in the US that can be directly induced to increase demand. The government is the biggest.

Kaa
07-25-2012, 12:25 PM
If Solyndra were funded by private investment alone, it would be deader than a door nail... and sooner too.

If Solyndra were funded by private investment alone it probably would not exist. Would have been a good thing, too.


Government loan guarantees certainly didn't save the company... but they helped to keep over 1,100 people employed for two years... purchase hundreds of millions of dollars of equpment from vendors, hundreds of millions of dollars in raw material, construction workers, outside contractors, etc.

LOL. Hey, I got an idea for you. Let's hire two construction companies. One will dig huge holes in the ground, the other will fill them in. Do it on a big enough scale and these companies will "keep over 1,100 people employed for two years... purchase hundreds of millions of dollars of equpment from vendors, hundreds of millions of dollars in raw material, construction workers, outside contractors, etc." You seem to think it would be an excellent idea. Very stimulating effect :-D

Kaa

John Bell
07-25-2012, 12:40 PM
Sounds to me like you're all centering on the problem of getting both induviduals and corporations to spend the money they have in an environment where neither segment is confident spending their money is a good idea right now.

One big problem we've got to overcome here in the US is the residual effects our burst real-estate bubble. I've lost a large percentage of my net worth as consequence of buying a house in 2007. It's not that big a deal on my day to day existence, fortunately, but it does take its pyschic toll. Losing, even if only on paper, 10-30% of your net worth in such a brief time and through no fault of your own in just a matter of a year or two will alter your outlook just as the Great Depression did our grandparents. And others have fared much worse than our families. For instance, I'd like to buy a new car this year. It's not that I need one, but I do want one. But I'm just as scared of spending the money as corporations are of spending theirs. The global slowdown precipitated by the Eurozone crisis with all its attendant consequences leaves me uneasy with parting with a few thousand in cash that would instead be distributed among the the salesman who sells me the car, the dealer who employs him, the trucker who shipped it, the factory in Indiana who built it, the suppliers to that factory, their suppliers and so on.

It's a chicken and egg problem, it seems. Before corporations will start spending their hordes of cash, they want see evidence the induvidual consumer is ready to part with theirs. So how do we restore confidence in the markets that it's ok to spend money right now? There must be some kind of incentive? Or is it simply a matter of restoring that elusive quality called confidence? I think we all agree confidence is the key, how do we get there?

Kaa
07-25-2012, 12:52 PM
There is a lot of schizophrenic thinking about this (and not only in the Bilge).

One the one hand you (that's a generic you :-D) want to raise consumer demand -- you want consumers to buy more stuff, preferably expensive stuff. On the other hand, you preach about the evils of focusing your life on material possessions, whine about how a society that wants to consume more stuff will kill itself and the Earth, too, and generally insist that we all need to consume less.

On the one hand you want the consumers and the companies to open their wallet and spend, spend, spend. On the other hand, you point to the debt-fuelled excesses of the mid-2000s, extol the virtues of prudence and having sufficient financial reserves, and demonize leverage and living on the credit card.

Kaa

ljb5
07-25-2012, 12:53 PM
LOL. Hey, I got an idea for you. Let's hire two construction companies. One will dig huge holes in the ground, the other will fill them in. Do it on a big enough scale and these companies will "keep over 1,100 people employed for two years... purchase hundreds of millions of dollars of equpment from vendors, hundreds of millions of dollars in raw material, construction workers, outside contractors, etc." You seem to think it would be an excellent idea. Very stimulating effect :-D

Isn't that pretty much what Mitt Romney did with the Salt Lake Olympics?

A whole bunch of people showed up, took government money, built some buildings, sold some trinkets... and now, ten years later, not a single person is still employed there.

But seriously: Your idea for filling in holes is not really so far fetched. The definition of 'stimulus' is economic activity that wouldn't exist without some external (artificial) justification.

In pure economics, nobody ever moves without incentive. Therefore, if people aren't moving, there is no incentive. The only way to make people move is to force some sort of incentive where none exists. That means, quite literally, making people do something they would regard as pointless.

If I had may way, of course, we'd fill in pot holes and build roads, bridges and light rail instead of just randomly filling in holes. But the economic basis is the same -- creating incentive to do something that people do not see an incentive to do.

ljb5
07-25-2012, 12:56 PM
There is a lot of schizophrenic thinking about this (and not only in the Bilge).

One the one hand you (that's a generic you :-D) want to raise consumer demand -- you want consumers to buy more stuff, preferably expensive stuff. On the other hand, you preach about the evils of focusing your life on material possessions, whine about how a society that wants to consume more stuff will kill itself and the Earth, too, and generally insist that we all need to consume less.

On the one hand you want the consumers and the companies to open their wallet and spend, spend, spend. On the other hand, you point to the debt-fuelled excesses of the mid-2000s, extol the virtues of prudence and having sufficient financial reserves, and emonize leverage and living on the credit card.

And that's how Kaa discovered the world is not a simple, one-dimensional place.

Welcome to reality. We have complexity and nuance here. You might find it confusing at first, but you'll get the hang of it eventually.

Kaa
07-25-2012, 01:00 PM
But seriously: Your idea for filling in holes is not really so far fetched.

Oh, yes, I know. Lefties don't see anything wrong with this kind of thing :-D

Me, I call it "destruction of value", but hey, I am an insignificant speck of dust at the feet of High God Keynes and His Prophet Krugman... :-P

Kaa

Kaa
07-25-2012, 01:01 PM
And that's how Kaa discovered the world is not a simple, one-dimensional place.

Welcome to reality. We have complexity and nuance here. You might find it confusing at first, but you'll get the hang of it eventually.

ROFL... Oh, ljb5, you're funny today! Please try to stay that way, I appreciate entertainment :-)

Kaa

BrianY
07-25-2012, 01:20 PM
So here's the situation as I understand it:

Companies are holding onto large piles of cash while they're waiting for consumer demand to pick up enough to warrrant spending that cash on new equipment, new investments, new jobs, etc. but consumer demand is not increasing. The result is persistent economic stagnation.

If this is true, then why do the Repbulicans continue to insist that tax breaks for the wealthy and businesses will spur economic growth? It seems to me that putting more cash in the hands of people and businesses who are already flush with cash that they're reluctant to spend won't do a thing to stimulate growth. What am I missing?

wardd
07-25-2012, 01:29 PM
So here's the situation as I understand it:

Companies are holding onto large piles of cash while they're waiting for consumer demand to pick up enough to warrrant spending that cash on new equipment, new investments, new jobs, etc. but consumer demand is not increasing. The result is persistent economic stagnation.

If this is true, then why do the Repbulicans continue to insist that tax breaks for the wealthy and businesses will spur economic growth? It seems to me that putting more cash in the hands of people and businesses who are already flush with cash that they're reluctant to spend won't do a thing to stimulate growth. What am I missing?

not much

JBreeze
07-25-2012, 01:56 PM
Here is an example of how Johnson & Johnson used overseas cash to invest in a Swiss medical device manufacturer ($19.7 billion) and avoid the "repatriation tax":

http://www.thestreet.com/story/11579435/1/johnson-johnsons-synthes-deal-revives-foreign-tax-debate.html

Apparently companies don't have to sit on their hands waiting for demand or tax amnesty.....

BrianY
07-25-2012, 02:00 PM
Apparently companies don't have to sit on their hands waiting for demand or tax amnesty.....

No they don't, but such investment does little or nothing to increase jobs in the US. The only people who benefit from this kind of thing are the non-US workers and the company's shareholders.

ljb5
07-25-2012, 02:11 PM
Oh, yes, I know. Lefties don't see anything wrong with this kind of thing :-D

It's not that I don't see anything wrong with it... it's just that I can balance that against what's wrong with other solutions.

Right now, you (the generic you) are stuck between two positions.

On the one hand, you want to stimulate economic activity, employment and investment. On the other hand, you want to let the economy run its natural course and let companies do what they will.

That's an economic position known as "having your cake and eating it too."

As I pointed out before, stimulus is an inherently un-economic activity. It requires people to do something that they have no natural incentive to do. (If they had a natural incentive to do it, they'd already be doing it and no stimulus would be needed!)

If you're not willing to accept that conflict, you (the generic you) cannot be helped.

But the moment you acknowledge the need for stimulus or incentive, you are ipso facto acknowledging the need for inefficient, un-economic activities that are not economically justified on their own. Once you do that, you've given up the right to complain.

BrianY
07-25-2012, 02:21 PM
There is a lot of schizophrenic thinking about this (and not only in the Bilge).

One the one hand you (that's a generic you :-D) want to raise consumer demand -- you want consumers to buy more stuff, preferably expensive stuff. On the other hand, you preach about the evils of focusing your life on material possessions, whine about how a society that wants to consume more stuff will kill itself and the Earth, too, and generally insist that we all need to consume less.

On the one hand you want the consumers and the companies to open their wallet and spend, spend, spend. On the other hand, you point to the debt-fuelled excesses of the mid-2000s, extol the virtues of prudence and having sufficient financial reserves, and demonize leverage and living on the credit card.

Kaa

Yes. It's quite a paradox, isn't it? It also illustrates very well the inherent shortcomings of an economic system that depends on ever-increasing levels of consumption.

Kaa
07-25-2012, 02:39 PM
Yes. It's quite a paradox, isn't it? It also illustrates very well the inherent shortcomings of an economic system that depends on ever-increasing levels of consumption.

It's not a paradox, it's a characteristic of human thinking that goes by the name of doublethink :-D

As to depending "on ever-increasing levels of consumption", consider the fate of societies which thought long-term economic growth wasn't important.

Kaa

BrianY
07-25-2012, 02:54 PM
It's not a paradox, it's a characteristic of human thinking that goes by the name of doublethink :-D

As to depending "on ever-increasing levels of consumption", consider the fate of societies which thought long-term economic growth wasn't important.

Kaa

There's nothing wrong with wanting long-term economic growth. The question is if the current model and assumption we're using to acheive this long term growth is sustainable. The ability of this nation to consume at a level suficient to assure growth at levels that we saw (and have come to expect) in the past for the indefinite future is highly doubtful. The models and assumptions that worked in the past no longer seem to apply and there are legitmate resons to question the spritual and economic benefits of uncontrolled consumerism.

Kaa
07-25-2012, 02:57 PM
Right now, you (the generic you) are stuck between two positions.

On the one hand, you want to stimulate economic activity, employment and investment. On the other hand, you want to let the economy run its natural course and let companies do what they will.

Well, a generic strawman could be stuck between these two positions, but that's the sort of thing strawmen get to do :-D A generic reasonable person, on the other hand, wants the economy to generate maximum possible value (subject to some constraints and temporal considerations) and so doesn't have any particular desire to either "stimulate" or "let the economy run its natural course". In contemporary Western societies it's not all that clear what does "natural course" mean, anyway.


As I pointed out before, stimulus is an inherently un-economic activity. It requires people to do something that they have no natural incentive to do. (If they had a natural incentive to do it, they'd already be doing it and no stimulus would be needed!)

That is a very weird idea of what a stimulus is. A Keynesian stimulus is very much an economic activity. It does not require people to do unnatural things, it simply removes constraints which prevent them from doing what people have "a natural incentive" to do. Do recall that the point of the Keynesian stimulus is to "raise the animal spirits", that is, incentivize the people to do economic things which they want to do -- not wander off into an artifically constructed garden of absurdities.

Consider a government which borrows some money and builds a bridge (instead of saving the money and building that bridge in ten years). That's stimulus, right? The government effectively moves the economic activity from the future to the present and that's about it. What's "un-economic" about that?

But I am not surprised that you see government spending as the end in itself. Who cares about economics, let's spend! What was the problem, again? :-D

Kaa

Kaa
07-25-2012, 03:01 PM
There's nothing wrong with wanting long-term economic growth. The question is if the current model and assumption we're using to acheive this long term growth is sustainable. The ability of this nation to consume at a level suficient to assure growth at levels that we saw (and have come to expect) in the past for the indefinite future is highly doubtful. The models and assumptions that worked in the past no longer seem to apply and there are legitmate resons to question the spritual and economic benefits of uncontrolled consumerism.

"Economic growth" is exactly the same thing as "ever-increasing levels of consumption".

If your "levels of consumption" remain constant, your economic growth remains zero. You don't consume "to assure growth", consumption is growth.

Yes, it's quite possible that growth/consumption will slow down compared to recent history. So? It's not like there's a God-given right to perpetual fast growth.

Kaa

ljb5
07-25-2012, 04:39 PM
Consider a government which borrows some money and builds a bridge (instead of saving the money and building that bridge in ten years). That's stimulus, right? The government effectively moves the economic activity from the future to the present and that's about it. What's "un-economic" about that?

The only thing "un-economic" about it is that it needed a push to get started.

According to classical economics, the invisible hand of the market causes everything to happen when the demand exceeds the supply.

If you're in a situation where something hasn't happened yet (e.g, the bridge is going to get built ten years, not right now), classical economics tells us that the incentive to do it simply isn't there yet... so doing it now, rather than in the future is creating an artificial situation.

The whole idea behind stimulus is to induce something to happen either (1) before it would happen naturally (2) that wouldn't happen at all naturally or (3) to make more of it happen than would otherwise happen.

All three of those are violations of the core concept of classical economics which is that the market provides exactly what, how much and when things are needed.

2MeterTroll
07-25-2012, 07:08 PM
Well you know guys all this is fine and good but poor folks cant buy stuff. so unless those big business brains figure out that all the workers are poor and cannot afford any of there products nothing is going to change. this is the saturated market problem. how does one sell more pots and pans if everyone has pots and pans, the usual way is to create demand (lie, marketing) by telling the potential customer that what they have is not worth what you have to sell. the other is to actually make a better product (the way theory says in the economy books about competition in the market place).&nbsp;<br><br>In actuality the bailout hurt the US because the consumer now has no illusions that the game is rigged. there is no free market and no capitalism; we have a Fascist state where the top hold all the cards and the bottom covers all the bets. problem is that the bottom/bank has no more money to spare for the bets at the top. the trillions held by the few Haven't paid back the bank cause they dont feel they have to<br>now because the bank has no money the players are freaking out. At one time the captains of industry reinvested in the country now all they do is take out loans and default as often as possible.

wardd
07-25-2012, 08:49 PM
you people are assuming the the very wealthy and those that control the big corps are not satisfied with the way things are

it used to be that being in charge of a big corp with lots of workers was the way to keep score, now it's about how much money you have which doesn't require a lot of well paid workers

Kaa
07-25-2012, 09:14 PM
According to classical economics, the invisible hand of the market causes everything to happen when the demand exceeds the supply. ...
All three of those are violations of the core concept of classical economics which is that the market provides exactly what, how much and when things are needed.

Whaaaat? :-D

Listen, dude. First, go read your .sig. Second, go read some economics textbooks. Neither classical economics nor what's taught in economics textbooks nowadays has much relationship to what you're proclaiming here...

Kaa

Kaa
07-25-2012, 09:14 PM
Well you know guys all this is fine and good but poor folks cant buy stuff. so unless those big business brains figure out that all the workers are poor and cannot afford any of there products nothing is going to change. this is the saturated market problem. how does one sell more pots and pans if everyone has pots and pans, the usual way is to create demand (lie, marketing) by telling the potential customer that what they have is not worth what you have to sell. the other is to actually make a better product (the way theory says in the economy books about competition in the market place).&nbsp;<br><br>In actuality the bailout hurt the US because the consumer now has no illusions that the game is rigged. there is no free market and no capitalism; we have a Fascist state where the top hold all the cards and the bottom covers all the bets. problem is that the bottom/bank has no more money to spare for the bets at the top. the trillions held by the few Haven't paid back the bank cause they dont feel they have to<br>now because the bank has no money the players are freaking out. At one time the captains of industry reinvested in the country now all they do is take out loans and default as often as possible.

Tyler! :-D Are you back? :-D

Kaa