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I recently decided that I need to adjust my money management strategy. As you may have read in my previous post, I was attempting to find a new institution that had more convenient access. Turns out though my bank has partnered with some other banks ton increase its’ ATM network. That works out nicely for me, because with my new strategy I will be using the ATM a little more often.

So here is my new money management plan:

• Each Monday I will take $120 out of the ATM (equates to $500/month).
• I will use only that money for my weekly expenditures.
• The left over money will be put back in on Monday, and an additional $120 will be taken out.
• All coin will be collected in a coin jar to be counted at a later date.

This new strategy should allow me to better manage my money, since I will be able to physically see what I have spent and what I have left. I have always found it a lot harder to spend with cash than with my debit or credit cards. I am going to make a few exceptions for things that I don’t spend cash on:

• Rent
• Cell Phone
• Utilities
• Gas
• Gym Dues
• Car Insurance

These items will either be paid by check or automatic transfer. This should theoretically work out for me. I will keep my current status posted each week. I plan on documenting what I spent each week and whether or not I met my goal.

I have always been an active saver, but it is always good to save a little extra. Each month I transfer $416 to my Roth IRA in order to maximize my yearly contribution. I haven’t been at my job long enough to qualify for their 401k program, but once I do I will switch my contributions to them in order to maximize my employer’s matching policy. I also transfer $50 per week into an online savings account. This allows me to save the money before I even see it. That way I am not tempted to spend it. So far it has worked well. I am just afraid that I am spending more than I have left over, which is why I have switched to this savings strategy.

I’d be interested to hear how anyone else who has tried this strategy has fared. All comments welcomed.

I have decided that I am going to open a savings account at a new financial institution. There a few reasons that I am going to do this. The first reason is that my current financial institution is too far away for me to use on a consistent basis. It doesn’t make a whole lot of sense for me to drive the 21 miles round trip to make a deposit there. That’s about a 40 minute trip to the bank and back. This bank is directly north of Seattle, and I hardly ever travel north of the city. This makes it especially inconvenient because I have to make a special trip to the bank just to take care of my business. With gas as expensive as it is, it is almost worth taking a hit on the ATM fees just to avoid the trip.

Instead of take the hit on the ATM fees, I figured that I would just open a regular savings account with ATM access at an institution that is located down town. This would help me in my new savings strategy. My new savings strategy is cash only. The plan is to transfer somewhere between $100-$150 a week from my current checking account to this new one. At the end of the week I would put back any cash that I didn’t use and then take out an additional $100-$150 for the next week.

I went downtown today to look at a few different institutions. The one that I was thinking about going with, Washington Federal Savings, did not have an ATM outside their building, so that pretty much defeated the purpose of joining them. Next, I went to Evergreen Bank, but they require you to have a $300 minimum balance in their savings in order to avoid the $8 fee. That didn’t sound like much fun to me, so I decided not to sign up for either one.

So I didn’t accomplish my mission, but here comes the ironic part. When I got home today I had my monthly statement waiting for me from my institution. When I opened it up there was a flyer inside of it. I assumed it was your typical refinance your loan flyer. When I took a closer look I found that it was an advertisement for a service called MoneyPass. MoneyPass is an ATM service that many banks have begun to use in order to expand their ATM network. The best thing about MoneyPass is that it is FREE! In downtown Seattle, the banks that are a part of this network are US Bank, Watermark Credit Union, and Northern Trust. Based on punching in a few random zip codes around the area, it seems like US Bank is the only major bank that uses the MoneyPass network, and the rest are small institutions.

This is the first time that I have heard of MoneyPass and if it becomes as popular as I think it will, I imagine people will start to see it around a little more often. It is a great idea and a no brainer for people who have been paying $2-$3 per transaction. According to the MoneyPass website, these are the main benefits to their service:

• No surcharge at ATMs that participate in MoneyPass
• Access to thousands of ATMs across the nation
• Convenient, accessible locations that include bank and credit union branches, convenience stores, grocery stores, restaurants, discount retailers and many more

When I was at the gym this evening I saw a story on the TV about a proposed “Gas Tax Holiday” for the summer driving season. Since I was too far away to read the subtitles I looked into it a bit once I got home. I found a nice article written by Nick Timiraos of the Wall Street Journal.

In the article titled “Will Voters Accept Obama’s Gas Plea?” we learn that Senator John McCain has proposed an elimination of the Federal Gas Tax from Memorial Day to Labor day. This would eliminate the 18.4 cent per gallon tax on unleaded fuel. Senator Hillary Clinton also supports this proposal. Senator Obama decided to take the rational approach and oppose this “holiday.”

The article suggests that Obama’s choice to oppose this tax relief act should put him in a “politically treacherous position.” The main reason for him being in troubled waters is because US consumers are fed up with high gas prices. The fact that he opposed a reduction in the price of gas could cause many people who were going to vote for him to vote for someone else.

This image was linked from opentravelinfo.com.

Politically, this move by McCain and Clinton is genius. At an average price of $3.60/gallon, the discount only amounts to a little over 5%. In reality that isn’t much to brag about, but the average person doesn’t look at it this way. To put this in simpler terms, in order for someone to save $100 in gas during this time period they would have to consume 543 gallons of fuel. At an average rate of 20 mpg, one would have to drive 10,860 miles over this three month span. If you annualized this mileage, it would be a pace of 43,440 miles for the year! Most leases penalize you if you drive over 36,000 miles over the course of three years!

“Obama has been positioning himself as a candidate who can win by telling voters hard truths rather than offering easy political solutions.” The easy political solution is to cut taxes for a short while to make consumers happy. In the end, a Gas Tax Holiday may be even more detrimental to the price of gasoline. In advertisements to Indiana and North Carolina voters, Obama makes the lack of savings crystal clear to voters. “You’re going to save about $25, $30, or half a tank of gas.” Although this doesn’t quite seem right, don’t forget to take my $100 in savings equation into consideration and then do the math. The savings are few and far between.

The only problem with Obama’s claim is that the average voter will likely think that they are saving a lot at the pump each time, but in the end this will not be the case entirely. When the price goes down by the amount of the tax, people will start to believe that gas has become much cheaper to them. As they think this, they will be more inclined to purchase even more gas. If the supply of gasoline is held at a constant rate and demand increases, then prices will naturally rise in order to reach equilibrium. This rise in price should offset whatever savings the consumer felt that they had saved from the lower prices.

One major option to reduce the amount of gas consumed each day is to increase gas taxes. The increase in taxes will raise the prices, and will cause demand to be reduced. Of course, no politician could ever run on the platform of increasing the gas tax by exorbitant amounts. That would eliminate any chance whatsoever of being elected.

In my opinion, something must be done to help wean the US off of our gasoline addiction. I believe that higher gas taxes, and/or increased toll roads would help promote more awareness on the issue. The funds from these taxes would be used to fund more mass transit options rather than improving existing roadways.

It should be interesting to see how the public reacts about Obama going the opposite direction on such a delicate issue such as this. A poll found in the New York Times shows just how the nation feels about gas taxes. It is obvious that Americans think wallet first, environment second.

As I was surfing the internet tonight I came across an issue that I had briefly read about earlier in the election system. What I came across was the official website for the “Fair Tax.” If my memory is correct, I recall a president candidate or two running with a major part of their platform being the “Fair Tax” system. According to the site, John Cox, Alan Keyes, Ron Paul and Mike Gravel all supported the Fair Tax. John McCain did not support the Fair Tax. Barack Obama and Hillary Clinton did not give and official answer one way or another. The official website can be found here.

Here is my official view of this proposed tax policy.

Under the Fair Tax system, there is no income tax. If you make $10/hour and work 80 hours during your pay period you will get a paycheck for $800, instead of the tax adjusted amount. The government has to get their money from somewhere though, and the Fair Tax system suggests that they should get it from sales taxes. The Fair Tax systems is actually entirely consumption based. Those who like to spend a lot of money will pay the most in taxes. Those who are savers will be rewarded by paying less in taxes. Compared to the current income tax based system, the Fair Tax would be the equivalent of a 23% income tax. Compared to a sales tax, the Fair Tax system would have a 30% sales tax.

Fairtax.org makes some compelling arguments for why a switch to this kind of system would be a good idea. Their main arguments are:

• Enables workers to keep entire paychecks
• Enables retirees to keep entire pensions
• Refunds in advance the tax on purchases of basic necessities
• Allows American products to compete fairly
• Brings transparency and accountability to tax policy
• Ensures Medicare and Social Security funding
• Closes all loopholes and brings fairness to taxation
• Abolishes the IRS

The people in favor of the Fair Tax feel that too much time money and confusion is spent each year attempting to file taxes. With a flat rate sales tax, this would cover all government expenses without all the confusion.

Some critics argue that the Fair Tax system would eliminate the deduction that is taken on interest payments on a home. Fairtax.org argues that since you will have more take home income this would offset the deduction that you would normally take. They also claim that “With the fair tax, mortgage interest rates fall by about 25 percent (about 1.75 points) as bank overhead falls.” Homes also become more affordable since “first-time buyers save for that down payment much faster, as savings are not taxed.”

The Fair Tax system has created what they call a “prebate.” This is essentially a prepayment by the government to offset the estimated amount of taxes that one would pay on essential goods and services. For example, a household with two adults and two children would receive a prebate of $537/month. This is based on the assumption that they will spend $28,000 on essential goods and services. Hawaii and Alaska oddly enough have a different prebate table, which actually result them receiving a greater amount in prebate money.

Some people argue that the prebate is pointless, and food and medicine items should just not be taxed. FairTax.org responds to this by saying, “the wealthy spend much more on unprepared food, clothing, housing, and medical care than do the poor. Exempting these goods, as many state sales taxes do, actually gives the wealthy a disproportionate benefit.” They also feel that “exempting one product or service, but not another, opens the door to the army of lobbyists and special interest groups that plague and distort our taxation system today.”

Although the system was designed to be free of loopholes, there is one that really stands out to me. The Fair Tax only taxes new goods. The theory behind this is that the item was taxed already when it was first purchased and should not be taxed a second time as a used item. Therefore, people who purchase used goods will not have to pay the tax. This could could have a couple of benefits/drawbacks. Poor people are more likely to buy used than the rich, and therefore will be saving 30% automatically on all used goods. At the same token, used goods could be sold at a 30% premium because it is common knowledge that these items aren’t going to be taxed, and therefore the missing tax gets passed on to the business owner in the form of higher profits. Having no tax on used items is something that would make any environmentalist happy. With a automatic 30% markdown on all used items, it would encourage people to buy used rather that new and would help to reduce consumption and encourage reusing old items.

Having no tax on used goods could have a major negative impact on companies though. Imagine a car manufacturer like Ford. Why would someone want to pay a 30% tax on a new $30,000 car ($9000 in taxes added on). The $30,000 car would actually cost $39,000 after taxes. It is a common theory that vehicles lose 20-25% of their value as soon as you drive them off the lot. At 20% we could conservatively say that the $30,000 car would be worth $24,000 not long after it was first purchased. Let’s say that the value drops by 20% by the end of the first year of ownership. Why would someone want to pay a $15,000 premium for a car that is a year newer? Remember that the slightly used car would not be taxed and the new one would. This would not make any sense at all from a consumer’s standpoint. I think that this Fair Tax system would have a very negative impact on big ticket item manufacturers.

I think one major advantage of the Fair Tax system is that it would help to reduce tax evasion and illegal immigrants. People can definitely evade taxes in this system by buying used goods, but there are times when you have to buy new goods. Food, medicine, motor oil and gasoline are some major items that quickly come to mind. The Fair Tax system would increase the amount of money that is put into the tax system by illegal immigrants. The system would also give a large incentive for illegal immigrants to become citizens. The prebate is given out to “all valid Social Security cardholders who are U.S. residents.” Illegal immigrants would not fall into this category and would not qualify for the prebate. They would be forced to either qualify for citizenship, or pay the 30% tax for food without a prebate.

Overall I think that the Fair Tax system has the potential to be an effective system. It has a few issues with it that could use a little more ironing out, but as our current tax system becomes more an more confusing I could see an increasing movement towards this type of system. For those who are interested in reading more about the Fair Tax, there is a book dedicated to the subject written by Neal Boortz and John Linder.

For a link to the official Fair Tax Act of 2007 – HR 25/S 1025 plain English summary, click here.

If you don’t keep a close eye on your checking accounts, you could be in for some major overdraft charges. Financial institutions typically tack on a hefty fee for drawing your account negative.

There are typically two different types of overdraft options. Knowing the difference between the two can be very important to your financial well being.

The first type of overdraft “solution” is typically an overdraft transfer. What happens is that if you were to overdraw your checking account below zero, the financial institution would take funds from another specified account to cover the difference. Typically a small fee between $2 - $5 is charged. This is the best option, and I would recommend that everyone sign up for it no matter how good your account balancing skills are. The reason for this is that if you don’t have this set up you will get an NSF fee which is typically over $20.

The second type of overdraft protection acts like a line of credit. This product will allow you to overdraw your checking account up to a certain amount for a given fee. If you don’t have the funds the transaction will still go through, but it typically costs over $20 per occurrance. If you are getting low on funds and you know you are going to overdraw your checking while waiting for payday you have a few options (one much better than the other). Option one is that you can continue to weild your debit card and get charged the $20+ fee for each transaction. This will add up a lot quicker than you think. Your $4 coffee is now $24 or more.

Instead, you should take option B. If you know you are going to have to dip into the reserves, you should go into your bank and withdraw everything up to your limit in cash. This will give you the funds that you desparately need, but the best part is that you will only be charged the overwithdrawal fee once. Use cash for all of your purchases, and when you get the money bring your account back up to zero.

With interest rates near all time lows, one overwithdrawal will wipe out all of your interest earnings for the entire year. Even if interest rates were much higher, why pay more in bank fees than you really have to?

An IRA (Traditional or Roth) is a great way to start saving for retirement. The beauty of the two IRAs is the tax benefits that each program offers.

With the Traditional IRA, your contributions are tax deferred, meaning you can deduct contributions from your earned income for the year. Your deposits also grow tax free until withdrawal. The only downside with a traditional is that withdrawals are taxed at the current rate. This may benefit you if you are in a high tax bracket now and expect to be in a lower bracket upon retirement.

With a Roth IRA your contributions are not tax deductible. Your funds grow tax free, and any earnings withdrawn after a certain age are not subject to income taxes. One advantage to the Roth is that you can withdraw your contributions without penalty. This can be great if you need funds for an emergency and don’t want to have the added burden of additional fees. A drawback is that you cannot deduct your contributions from your taxes.

As you can see, each has its own unique set of advantages and disadvantages. To read the official IRS rules and regulations for each type of account, click here.

One important thing that you should be aware of though is that you are only allowed to contribute a certain amount each year. If you are under 50, the 2007 contribution is $4,000 and the 2008 contribution limit is $5000. If you are 50 or older you can contribute up to $5,000 in 2007 and $6,000 in 2008. I included the 2007 tax values because you can actually make contributions to your IRA for the previous tax year all the way up until taxes are due on April 15th, 2008. By making a 2007 contribution you are giving yourself the opportunity to maximize your total allowable contributions.

Sometime in May the government will be sending out checks worth up to $600 per individual or $1200 per household. The government feels that by doing this they will be able to stimulate our currently stagnant economy. It seems like a fairly good idea and all, but will people really spend the money? I think that for the most part people will spend it. People will look at the money as an unexpected gift and by spending it they won’t be deviating from their budget because they were never expecting this money in the first place. Sure, this may give a temporary boost to the economy, but it won’t be anything long lasting or long term.

Here is what I project people will do with their money:

50% will go out and blow it all within the first few weeks on something that they been wanting but not able to afford. These are the people who probably need this money the most to go towards paying off debt, but that isn’t going to happen.

20% will save the money. These people have always been good savers, and they most likely see this as a golden opportunity to increase their savings without doing any extra work.

10% will put the money towards their credit cards or other sort of loan product in order to pay it off earlier. These people have made an excellent choice for their personal finances. Any opportunity to pay off more debt should be taken advantage of. This is a golden opportunity to do so.

20% will do some combination of the above three things. It will likely be more spending than saving though.

Here is one thing that I don’t like about this rebate. Americans are drowning under piles of debt, but with this free money, most people aren’t going to put it towards paying off their debt. I think that the government should automatically put at least half if not all of this so called “relief” money towards their current debt. They would put half of the funds towards the debt and half as a refund check to the citizen. For those who were in collections or had late debts, all of the refund check would be put towards the creditors. This would encourage people to get up to date with their accounts so that they could get the majority of their check.

All this credit checking would theoretically create a high cost for the government, but the relief act would require creditors to submit a petition for funds if their debtors met a certain criteria. If they did not submit the petition they would not receive a portion of their refund.

I know that this is most definitely a fantasy idea, but I believe that if something like this were to take place, the American citizens would be much better off than they would be with just a straight refund check. I do agree that the government should not be one to tell people what to do with their money, but I do believe that if there was a financial incentive to do the right thing with it, people would be more receptive.

I am really curious to hear what others think about this idea. Do we need to encourage people to pay off their debts? Should the the government have a say or an influence in this? And last but not least, what will you be doing with your relief check come May?

I was at Barnes and Noble earlier today when I came across a “new” book written by Suze Orman. Now when I say that the book is new, I mean that it is new to me. The book has actually been out since March of 2005, so it is actually about three years old. Nevertheless, the information that is inside does not really change from year to year. For those of us who do not know who Suze Orman is, she writes articles for Yahoo! Finance and also has her own show on CNBC called the Suze Orman Show. Her specialty is personal finance.The book that I found was called The Money Book for the Young, Fabulous & Broke. The book is geared towards the younger generation who is in their twenties up until their early thirties. It is most directed to those who have accumulated a pile of debt going through college, and now that they are out they are struggling to make ends meet with a low paying job, high cost of living and endless debt. Even if you aren’t hopelessly in debt, a younger person can find this book to be especially beneficial. In this book, Suze covers a variety of topics over the course of 10 chapters and 360 pages.

Here is a summary of the table of contents:

1. Know the score (Credit scores)
2. Career moves
3. Give yourself credit (Get the most out of credit cards)
4. Making the grade on student debt
5. Save up
6. Retirement rules
7. Investing made easy
8. Big ticket purchase: Car
9. Big ticket purchase: Home
10. Love and money

The thing that I really liked about this book when I was browsing through it was how simple the author makes things seem. Suze puts all her points into really simple terms that people can relate to and understand, even if they have never taken a finance class before. If you or someone you know is going through a financial rough patch, this could be really helpful to get them to understand where the best places would be to put their money. Currently you can buy this book for only $6.25 at Abebooks.com

Mutual funds can be a great way to diversify a portfolio. A mutual fund allows an investor to put their funds into many different stocks at once without having to research a bunch of different companies. This can be a great way for a novice investor to get into investing. Instead of you managing your portfolio, the mutual fund manager will in a sense manage the fund for you. Another great thing about mutual funds is that you can achieve great diversification without having to pay hundreds of dollars in commissions.

The fund in particular that I am reviewing today is the Fidelity Freedom 2040 Fund (FFFFX). Fidelity has created a family of funds that are targeted for specific retirement dates. It is optimum if you choose the fund that is closest to your projected retirement date. The funds are set up in a way so that in their early years they are fairly aggressive, and as the fund gets closer and closer to the projected retirement date it gets more and more conservative. In the end this fund will merge with the Freedom income fund. This is how an investor should structure their investments, so it helps to take a lot of the guesswork out of allocating your investments.

The Freedom 2040 fund invests in a number of different Fidelity funds. As of the writing of this article, the fund is composed of:

Currently the fund is down 7.91% for the year so it is at a bit of a discount for those who want to get in on it. This drop in value could be explained because of the fund’s high investment in U.S. Equity funds while the U.S. market has been going through a correction. Over the past 5 years, the fund has produced a 14.59% APY. Based on the target date of 2030+, Morningstar gives the fund 4 out of 5 stars. Lipper gives them a 1 year ranking of 247 out of 1598 Growth and Income funds.

The minimum investment for this fund is $2500.

I currently have a financial position in this company. You can see all of my current positions here.

As always, I recommend that you do your own due diligence before investing in something. I always try to provide pertinent and trustworthy links so that this can be easily done.

After being in the toilet for the past six months or so, the banking sector is starting to show a little promise again. After months of watching banks write off bad debts, investors are starting to show some hope for our financial institutions. This newfound hope and optimism can’t be attributed to the vision of bank CEO’s. Bank executives just received a temporary bailout from their new best friend Ben Bernanke at the Federal Reserve. Although it is not the job of the Fed to bail out banks from their poor decisions, it is their responsibility to ensure that the economy keeps running smoothly. When thousands of banks around the country all follow each other’s lead like a bunch of lemmings and made poor loans we suddenly have a large problem on our hands. When banks start to do bad people worry. Just the other day an older gentleman came into our credit union and asked to liquidate his entire account into cash. It came out to about $64,000. He also insisted that each bill be marked with a counterfeit pen to ensure that he was getting real currency. Obviously these actions come from someone who has lived through the depression, but if you get enough people acting irrationally like this because they feel their money is in jeopardy, then suddenly the banks will start to face some real problems.

So what exactly are the responsibilities of the Federal Reserve you may ask?

Taken straight from the Federal Reserve’s Web Site:

“Today, the Federal Reserve’s responsibilities fall into four general areas:

• conducting the nation’s monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices
• supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers
• maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
• providing certain financial services to the U.S. government, to the public, to financial institutions, and to foreign official institutions, including playing a major role in operating the nation’s payments systems.”

If they don’t take care of the majority of the banks, then they are not taking care of their responsibilities. So what have they done exactly to take care of the banks? On January 22nd, 2008 they came out with a surprise announcement that they would be cutting the federal funds rate by 75 basis points (1% =100 basis points) from 4.25% to 3.5%. The federal funds rate is the rate that banks make overnight loans to each other. The market for loans and savings products typically follows the movement of the federal funds rate. Since they lowered the rates, this means that mortgage rates will drop and savings products like money market accounts and CDs will drop as well.

The Federal Reserve states that “while strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets.”

Let’s examine what effects this rate cut will have.

Lower rates decrease the cost of borrowing funds. A borrower can save a ton of money by borrowing at 5% instead of 7%. This means that many businesses will take advantage of the lower rates to borrow money to expand their operations. With expanded operations, they will likely need more employees to run this new operation. This satisfies the Fed’s first responsibility of “pursuing full employment.”

Mortgage rate will drop and with that comes a wave of refinancing. Many people got in on the real estate boom with loans they didn’t fully understand and weren’t fully qualified for. You can blame both parties for this problem. Lenders should have fully explained the drawbacks of the loans they were putting people into. When borrowers low introductory payments reset to higher levels, many homeowners were shocked to find that their monthly mortgage payment had almost doubled. According to an article in the Boston Globe “a record $375 billion of subprime loans reset to higher payments in 2007 and another $340 billion will reset this year.” The lower rates could be able help qualified credit borrowers refinance their loans to a lower fixed payment that they might have a higher probability of affording. Another option that troubled borrowers may have is selling their home to pay off the mortgage and either move into a cheaper home or rent. According to the National Association of Realtors, “the median price of an existing single-family home dropped 1.8 percent in 2007.”  In many markets this figure is much lower, meaning that the sale of the home is not enough to cover the outstanding balance on the mortgage. This sad reality is what has led to the 75% increase in foreclosures in 2007.

Savings rates will drop. According to Bankrate.com, the national average for 1 year CDs is a measly 3.66%, down from last week’s 4.12% average. This has a very negative effect on those using CDs and other safe investment products for income. If inflation is at 3% you are hardly making any real gains in your net worth. You are just maintaining your purchasing power. When rates are low, savers tend to take their money out of CDs and money market accounts and put them into the stock market or mutual funds where they can make a better return. This could explain why the Dow Jones Industrial Average has increased from a low of 11,508.74 on January 22nd to a closing price of 12,480.30 on January 29th. That is an 8.4% return for one week. That sure beats 3.66% for an entire year!

The Fed also stated in their January 22nd announcement that “appreciable downside risks to growth remain.  The Committee will continue to assess the effects of financial and other developments on economic prospects and will act in a timely manner as needed to address those risks.” This statement is referring to the January 29th and 30th meetings that the Fed in having. In this meeting they will be deciding whether or not their 75 basis point rate cut was sufficient. We should be expecting an announcement sometime on the 30th. Bank stocks and the stock market in general should react inversely to the decision made by the Fed.

In conclusion, I think that the Fed will go ahead and cut rates another 25 basis points. If this cut is made it will probably be the last for a long time and should help to restore some faith and stability to the financial sector. I think a 25 basis point rate cut is necessary for the psychology and mindset of investors. It should be interesting to see how this all plays out over the coming months.