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Could Kogan bring interest rates down?

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by Peter Switzer

The persistence of the fiscal cliff story overhangs US stock markets and it’s becoming so punishing I’m even thinking about giving Kogan’s assault on the mobile phone market a free plug! More broadly, this internet retailer and his ilk could, believe it or not, end up delivering lower interest rates in Australia!

Ruslan Kogan, who has been terrorizing Gerry Harvey for the past few years has now made an aggressive push into the telecommunications industry with the launch of Kogan Mobile, offering Australians unlimited calls, texts, and six gigabytes of monthly data starting at just 82c per day.

But more on that later!

On Wall Street

Wall Street was positive until the Federal Reserve boss Ben Bernanke spoke and it shows the importance of policy makers, with America dealing with the fiscal cliff as both the Dow and the Nasdaq went negative, though not by much.

The simple facts are no one knows what the fiscal cliff negotiations will spit out and now there’s the uncertainty of what the Fed might do, however Bernanke is more transparent and predictable compared to the nincompoops in the Congress.

The Dow ended down 2.99 points at 13,245.45 while the S&P 500 was up 0.64 of a point at 1428.48.

Bernanke’s speech

The main points from Bernanke’s address were:

The economy is growing at a moderate pace
Interest rates will stay low until unemployment hits 6.5 per cent
A lower jobless rate is wanted but at that point interest rates would need to go higher
Treasury purchases will continue next year at the same pace
Inflation over the next two years is expected to be around 2.5 per cent
The jobless rate will be high until 2015

On the fiscal cliff issue, the talk was about a phone call between President Barack Obama and the Republicans' John Boehner but there were no real details of what was said. The very act of these two leaders talking is seen as a plus.

Rates to fall?

Back to Kogan.

For those who want to know what the deal is for Kogan’s Mobile Pre-Paid Plans, have a look at: http://kogan.com/au/mobile While I like price competition, this raises questions over what profits telcos will make in the future. It also reinforces my view that inflation is being beaten by innovative private companies and foreign suppliers via the internet, explaining why predictions that the cash rate could fall to two per cent next year have more credibility.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Watch more from Peter on SWITZER TV.

Published on: Thursday, December 13, 2012

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